Stock market got off to a strong start on Monday with both the benchmark indices, S&P BSE Sensex and NSE's Nifty50 rallying over 2 per cent each. Investor sentiment got a major boost after most exit polls predicted thumping majority for NDA (National Democratic Alliance) in the Lok Sabha Elections 2019.
Foreign investors, analysts say, are betting big on the return of Narendra Modi. Hence, if the results (due May 23) are in-line with the exit polls, indices are expected to touch record highs in the coming days.
Sudip BandyopadhyayHowever, Sudip Bandyopadhyay, group chairman at Inditrade Group of Companies cautions that invstors should tread cautiously given the sharp run-up. Exit polls, he says, should be taken with a pinch of salt even if they give out the overall trend
"Exit polls, by and large, have come in line with expectations. However, in some cases, they have gone completely wrong, like in Australia recently. In 2004, the exit polls predicted NDA coming back to power but it didn't happen. So, exit polls must be taken with a pinch of salt as India is a large country. Data shows around 70 crore people voted whereas the sample size was just around 7 lakh," Bandhopadhyay says.
What will happen if actual results are in sharp contrast to the exit polls?
The market, in all probability, will press the panic button initially and heavy selling will be witnessed across-the-board, Bandyopadhyay says. That said, he expects these reactions to be short-lived. After some time, the market will stabilise and look for fundamental and macro cues for direction.
"Also, in the spectrum of politics, politicians have, by and large, tried to do the right things as far as the economy is concerned. So, there won't be any long-term impact on the market," he says.
There are still good quality stocks that can be picked as they look attractive after correcting significantly in recent days. For an investor whose time horizon is at least one year, there are opportunities to buy good quality stocks. Markets are volatile and markets will be volatile for the next 15-20 days. Buy, every dip is an opportunity to accumulate good stocks.
Sectors to bet on
Bandyopadhyay is positive on cement stocks as he feels pricing power is backing the cement sector. That apart, chemicals, especially, specialty chemicals sector is another sector he is bullish on. "Indian specialty chemical players have a fantastic future given the US-China trade tensions. So, one should buy good quality stocks from these sectors," he says.