Poll results may trigger knee-jerk reaction

Markets are gearing up for the outcome of Assembly elections in five states – Tamil Nadu, Kerala, West Bengal, Assam and Puducherry – scheduled for May 19. Though an unfavourable outcome for the Narendra Modi-led National Democratic Alliance (NDA) could trigger a knee-jerk reaction in the markets, analysts rule out a significant correction from the current levels.

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Factors like the progress of monsoon, corporate earnings, inflation trajectory and the Reserve Bank of India (RBI)’s stance on policy rates will be key in determining market direction over the next few weeks, they say.

Also Read: Kerala assembly elections: Will BJP make inroads this time?

“The markets could see a negative knee-jerk reaction and come under pressure in the short-run in case the NDA were to lose in Assam, the only state where it hopes to win. Even then, I do not expect the Nifty50 index to slip below 7,500 levels. The upside, too, seems to be capped around 7,900 levels. Besides the election, the ongoing results season and the progress of the monsoon over the next few weeks will have a bearing on market direction,” says U R Bhat, managing director,Dalton Capital Advisors.

Also Read: Assam assembly polls: Will Himanta Biswa Sarma make BJP's luck in the state?

For Tirthankar Patnaik, India strategist at Japan-based Mizuho Bank, the progress of monsoons over the next few weeks is a bigger concern than State election outcomes. He, too, expects the Nifty50 to find support at 7,500 levels in case of unfavourable election outcome and sees the upside capped at 8,000.Read more.