Poll results boost sentiments, not fundamentals: Analysts
NEW DELHI, DEC. 9:
With key stock indices touching new highs following the poll results in four key States, leading equity strategists feel that such a development largely impacts the market sentiment rather than overall economic fundamentals.
The same was reflected in the stock market on Monday. The BSE Sensex gained over 300 points to close at an all-time high of 21,326, while the NSE Nifty recorded gains of over 100 point, to end at 6,364.
“The State election results are likely to boost the sentiment, but they should not have any immediate impact on the fundamental outlook,” said Nomura.
“We believe that a stable Government following the 2014 general elections could remove one key source of uncertainty for investment, and support a more sustainable growth up-tick from third quarter of 2014 into 2015. We expect GDP growth to remain largely flat at 4.8 per cent on a year-on-year basis in 2014 (from 4.7 per cent in 2013) before rising to 5.7 per cent in 2015,” it said.
Bank of America Merrill Lynch, in its note, said: “We think politics is much more of a noise event …as long as 2014 throws up a stable Government like in 1999 (BJP-led NDA), 2004 and 2009 (Congress-led UPA). Growth is really tied to global rather than national factors.”
According to leading brokerage firm Motilal Oswal, the latest poll results have established the fact that growth and governance have clear preference over entitlements for voters. “Capital markets have started responding favourably to the prospects of a change in government, in the hope of an improvement in growth and governance…,” research wing of the firm said in its report
Noting that the results were well received by the market, Nomura expects the market gains to be led by bank and manufacturing stocks. “We think that chasing the rally is not prudent, as it remains to be seen how the incumbent party will react to its poor showing in the State elections. We maintain our end-March 2014 Sensex target of 22,000,” it added. Praveen Nigam, Managing Director of Amplus Consulting, termed BJP’s latest showing as a jingle bell for FIIs. He believes that BJP is a big ray of hope for not only foreign investors but also the domestic industry.
But there is a word of caution too. “This rally may not be very long lived and the Assembly elections are very different from the Lok Sabha elections. No doubt it is a good sign for the industry, but there is always a gap between the cup and the lip,” Nigam said.