Exit Poll outcome: Brokerages see market rally in the making

"We see May 23 as a binary event and a decisive majority for the current government (NDA) would be viewed as the better outcome," said Lavina Quadros, Equity analyst at Jefferies.

Markets witnessed a gap-up opening on Monday, a day after most exit polls showed Narendra Modi – led National Democratic Alliance (NDA) return to power for the second time. The S&P BSE Sensex zoomed over 900 points at open to cross the 38,700 levels. The broader Nifty50 index, on the other hand, saw its best opening gain after the 2014 Lok Sabha result and hit 11,694 levels – up nearly 2.5 per cent, or 284 points.

Here’s how leading experts and brokerages have interpreted the results and its likely impact on the markets in the near-to-medium term:

LAVINA QUADROS, EQUITY ANALYST, JEFFERIES

We see May 23 as a binary event and a decisive majority for the current government (NDA) would be viewed as the better outcome. Defence, roads and renewable energy saw a pick-up in announcements and execution post 2014 elections. Industrial companies’ execution and order flow have improved, but 2019 has not seen the pre-election rally of 2014. We expect a strong post-election rally if the current government returns, as the election has been an overhang

Motilal Oswal, CMD, Motilal Oswal Financial Services

The exit poll results are better than the expectations. Markets will move up by 2 per cent - 3 per cent in next few days. I am quite optimistic at these levels. Investors should increase equity allocations

Ajay Bodke, CEO (PMS) Prabhudas Lilladher

As per the poll of polls, NDA, led by BJP, is likely to easily cross the half-way mark. This is a big relief, as it favours continuity and familiarity in terms of roll-out of policies. If NDA were to fall short of the half-way mark, it would have led to scramble for allies like TRS, Jagan Congress & BJD.

Institutional investors will look forward to the fillip to economic growth provided by structural reforms strongly pushed by Narendra Modi like GST, IBC, RERA, DBT etc.

With benign inflation, well-anchored inflationary expectations and a relatively stable exchange rate, focus will be on how Modi is able to kick-start slowing engine of consumption, revive private investments, provide fillip to anemic exports, alleviate farm distress, create adequate employment opportunities, rescue the precariously perched NBFC & real-estate sectors, generate adequate resources through better administration of taxes & divestment to fund the increasingly populist impulses.

Naveen Kulkarni, head of research, Reliance Securities

The exit polls have been better than market expectations with the ruling party getting a comfortable majority. However, the market has been rallying for the last two days and it has factored the information to some extent. 

The market is likely to rally further but the rally may not be significant as there are challenges of not so encouraging earnings growth, lower liquidity, slowing economy and global challenges. There could be sector specific rally like infrastructure and banking that could do well

Deepak Jasani, head of retail research, HDFC Securities

Most exit polls have predicted NDA to win the Lok Sabha elections with a good margin. This was partly discounted in the markets over the last few days. The Street would like it even more if the BJP on its own gets a majority in the Lok Sabha. 

However, going by the way the exit polls in the last two elections were off the mark from the actual numbers, the markets would get excited but not super excited. Over the next three days, Nifty could look up to corporate results and / or global developments. The fact that NDA may be able to attain majority in Rajya Sabha only in 2020 or 2021 is a minor dampener as major reforms would need passage in both houses.