Gujarat elections: Expect market volatility if results differ from expectation

The week gone by was volatile on expected lines It ended on a positive note post the exit polls for the two state assemblies of Gujarat and Himachal Pradesh which were announced on Thursday evening According to the polls BJP is expected to retain Gujarat and win Himachal Pradesh which was earlier ruled by Congress The margin of victory in Gujarat is a matter of debate and conjecture but the market has based its present expectation at around 110 seats in a house of 182 seats The outgoing government had 115 seats held by the BJP This effectively means that actual results on Monday around these expectations are already built into the price There would be sharp movement in either direction if the actual results differ from these expectationsUnion Finance Minister Arun Jaitley at a New Delhi meet PicPTIPoint madeThe BSESENSEX gained 21267 points or 064 per cent to close at 3346297 points NIFTY gained 6760 points or 065 per cent to close at 1033325 points The broader markets saw the BSE100 BSE200 and BSE500 gain 048 per cent 042 per cent and 035 per cent respectively BSEMIDCAP lost 041 per cent while BSESMALLCAP was down 023 per cent The top sectoral gainer was BSEOILampGAS up 109 per cent followed by BSEAUTO 088 per cent and BSECONDUR 082 per cent The top sectoral loser was BSEREALTY down 188 per cent followed by BSEPOWER 121 per cent and BSECAPGOOD 082 per cent The top individual stock to gain was Dr Reddys up 788 per cent followed by MampM up 634 per cent and Lupin 465 per cent The top loser was Infratel down 530 per cent followed by Cipla 481 per cent and ICICI Bank 234 per centA repolling centre at Nava Naroda on the outskirts of Ahmedabad PicAFPBitcoin beginsThe Indian rupee recorded sharp gains and was up 41 paisa or 064 per cent at Rs 6404 Dow Jones continued its strong showing and gained 32258 points or 131 per cent to close at 2465174 points Bitcoin has begun trading on the Chicago futures exchange and has notched fresh highs It was last trading at just under 19400 and has gained over 14 per cent in the last weekRaised ratesThe US Fed has raised interest rates for the third time in the current calendar year to between 125150 per cent They have also said that in the next calendar year they would raise rates on three occasions This would put a strain on the easy liquidity and cheap money that was available for investment People would now look for performing markets and pick and choose the better ones for deploying resourcesSeeing returnsThe current calendar year has seen returns of 25 per cent and has been a fruitful year for investors The buzz on the street is that if in the next calendar year markets return even half of this number it would be a good return The idea is that investors must learn to lower their expectation from the coming year The biggest concern is of course valuations which are extremely rich and need to correct sooner than later Another key learning from my interaction with some industry opinion makers is that do not invest in beaten down sectors instead invest in stocks from that sector looking at opportunities and capabilities of each company While there would be plenty of opportunities to invest one would have to look at companies and do some homework in selecting the companiesLifetime highsThe lifetime highs made on the BSESENSEX of 3386595 points and NIFTY of 1049045 points are just one days movement away They may happen post the election results on Monday or may not happen till the early part of the next quarter of the calendar year 2018 Monday is a great chance for the same to happen One must remember that the results have been partially discounted Counted in the BJP winning HP with over 45 seats is factored in Similarly BJP winning Gujarat and getting between 105115 seats is also discounted For there to be a sharp move and go past the previous high the margin of victory has to be bigger On the flip side if the numbers reduce than the above when actual results are announced There could be a selloff in the market and technical analysts would term it as a failure to test the previous highUse rallyIn either case the setting is brilliant and one is sure to have its share of volatility on Monday In any case markets are also set post this election result event to go in for medium term correction triggered by either profit taking or disappointment Use the ensuing rally to book profits and sit on cash which would be handy post the profit takingArun Kejriwal is founder of the Mumbaibased advisory firm Kejriwal Research amp Investment Services Pvt LtdDisclaimer No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities or as advice to do so in any way whatsoever All matter published here is for educational and information purposes onlyCatch up on all the latest Mumbai National and International news hereDownload the new midday Android and iOS apps to get updates on all the latest and trending stories on the go