The hype and expectation from the Loksabha election was a strong BJP performance along with its NDA allies. Actual results fell well short of these expectations. This came as a rude shock to the markets and we saw the results of this when indices were at one point of time down nearly 10%.
However the NDA has garnered 291 seats which provides it comfortable majority above the 272 mark. The concern here is the stability of the alliance and its main partners CB Naidu and Nitish Kumar remaining true to alliance. If I think from the perspective of these leaders, in case of CB Naidu he has always been interested in AP, and its development agenda. For someone like him, a development minded central leader like PM Modi makes more sense. And for someone like Nitish Kumar who has the support of BJP in Bihar in his CM stay, and who has in the past had poor experience in allying with Lalu Yadav and his son, staying with NDA makes a lot of sense. He might have to let go of his alleged dream of becoming PM, but can seal his CM post and carry on good work in Bihar with support from NDA at centre. So logically the alliance should be strong.
On BJP’s side, it needs only 32 more MPs to have complete majority. And there are many small independents, and smaller parties who can be convinced to join the alliance. Even if one of the allies in form of Naidu (less likely) with 16 MP or Nitish Kumar with 12 MP( slim chances but possible looking at his past U turns) were to dither in their support, the overall MPs they have is too small for big bargaining positions. Plus BJP has Shinde sena, Chirag Paswan and others to count as allies.
Overall NDA as an alliance could be a stable alliance unless something catastrophic, or stupid happens.
But when markets are fed the diet of 400 paar, the reality of seeing BJP struggling to cross even the majority mark on its own is a big jolt.
My guess is once better understanding of the situation prevails and govt formation actually takes place, markets can stabilise. The silver lining here is that economy is booming, and once the perception of stable govt is established, things should improve. Besides these the usual reasons for market swings in form of global factors, etc will keep affecting markets.
Coming to individual stocks and sectors, this is a ripe time to observe things closely and watch out if any stock/sector starts showing strength by clearing fresh 52 week highs or multi year highs. A lot of portfolios were hit yesterday to the tune of 5 to 15% in a single day, but this kind of volatility is not the norm. Once the markets stabilise, focus will shift again to fundamentals of companies and major price trends on charts and prices should move in tandem. As of now fingers crossed. 
The main thing this time the exit polls have demonstrated is that no one knows everything and gets things right all the time.
| Subscribe To Our Free Newsletter |
