ASSEMBLY ELECTIONS RESULTS – HARBINGER OF 2019 RESULTS?

The Exit Polls has caused the traders and FIIs alike to literally scoot and exit from the markets.

The Assembly election results are to come in tomorrow and the moods are somber. The exit polls prove what we have all been fearing all along – maybe the win for Modi in 2019 Lok Sabha elections will not be a complete sweep like the last time around; it might indeed turn out to be a tough fight.

The Exit polls predict a sweeping victory for Congress in Rajasthan; TRS in Telangana, a hung verdict in Mizoram . For Madhya Pardesh, some exit polls have predicted a victory for BJP and some for Congress.

The market has reacted pretty vehemently to this, with the BSE falling down by a huge 700+ points. Thus the very fact that it could be a very close victory, nevertheless a victory for the BJP has sent the markets scurrying for cover.

All the stocks, which have been ‘unofficially’ recognized as ‘Modi’ stocks were the first to be down today. These are companies whose promoters are stated to be “close” to Modi – Adani group, Torrent and even Mukesh Ambani’s Reliance. Other stocks which got this ‘collateral disadvantage’ are L&T, LIC Housing Finance, Jaiprakash Associates, Tata Power and other energy and ancillary companies. There is the general belief that such “modi”fied stocks will gain when he comes to power.

But at the same time, we need to remember that unlike the Western countries, exit polls in India are often inaccurate than accurate. So lets not take everything on face value and best to wait for the results, which are just a few hours away.

Tomorrow, the markets will remain on tenterhooks till we see a clear trend of victor or loss coming in. BJP winning in all the states will be a win-win situation and Congress too winning or TRS in Telangana are acceptable truths. But what will really worry the market would be no clear mandate – no single party gaining victory. If the national party depends on too many parties, it would be bring in too much instability. Well, the results of these assembly polls are being extrapolated to what could be the possible outcome in 2019. And that is what the market is reacting to; not the actual assembly election results.

So how does one play this uncertain market? Best to avoid trading in political stocks, especially those, which, raise huge questions on corporate governance and companies owned by politicians. Well, if you cast your vote for a politician maybe you can buy his stock also – putting conviction and money, both at stake. To get close to a politician or not, is a tough decision -when in ruling power, its great times but when the chair is lost, its downhill.  Remember, power resides where you believe power resides. Power of the idea, power of the fundamentals or power of the person running the company? That’s the choice you need to make.