Assembly Elections 2016: Do exit polls indicate 'acche din' for markets?

After a choppy session on Monday, markets gained ground on Tuesday with the Nifty50 index rallying 50 points to reclaim 7,900 levels in morning deals. Though the rally comes largely on the back of positive global cues, the markets are also taking State election's exit poll in their stride.

The exit polls which were unveiled post the market hours on Monday predicted a Left Democratic Front (LDF) victory in Kerala, throwing out the Congress-led ruling United Democratic Front (UDF); and in Assam, where the Bharatiya Janata Party (BJP) could emerge as the single-largest party, going on to form a government there for the first time in history, at the cost of the Congress. CLICK HERE FOR THE FULL STORY

As regards the market direction, technical analysts say that the Nifty50 index now has to cross and hold above 7880 to witness a move towards 7950 and 7979 levels. Holding below 7,777 may drag it towards 7,700-7,678 levels with fresh selling pressure.

Meanwhile, here's how brokerages across the country are interpreting the exit polls:

Nomura

Exit polls for the just-held five state elections suggest that the BJP is expected to win only in Assam, along with some improvement in its tally in other states. These results are largely in line with expectations. 

Will the BJP’s ability to push through legislative reforms improve after these results? Together these five states account for 51 seats in the Upper House, of which six will come up for re-election in 2016 (all in Tamil Nadu), six in 2017 (all in West Bengal) and eight in 2018 (West Bengal and Kerala). The BJP’s victory in Assam will not help, as none of the seats (seven in the Upper House) are up for re-election until 2019. 

Overall, if the exit polls are accurate, then the state election results could marginally improve the BJP’s seat tally in the Upper House, but the government will need to continue to build a consensus to push through legislative reforms in the Upper House (since its seat share remains under 50%).

 

Equinomics Research & Advisory

The State assembly elections do not matter to the economy and the equity markets, in our view. The ruling party would enjoy a majority in the Lok Sabha for the next three years. Five states in which assembly elections were held, the ruling party didn’t have any major share of their Rajya Sabha seats before these elections. Hence, the outcome of these election results has no room for any disappointment.

IDBI Capital

The markets have taken the exit polls positively. The prediction of a win for BJP in Assam is a key positive. They also seem to be reading the fine print of the possibility of Congress losing in two states - Assam and Kerala. Going forward, the Nifty can target 8,200 levels to 8,350 in next few weeks as long as it is able to stay above 7,780 holds. Expect some short covering as well.

IIFL

The market seems to be in good shape for now and even as exit poll results point to a better performance by the BJP, investors will prefer to wait for the results later this week.