MARKET OVERVIEW :
Indian stock market likely to see profit booking after Lok Sabha elections 2024, says Bernstein: Investors beware!
Indian stock market started the year 2024 at record valuations, particularly in the small and mid-cap space. After continuing the run in January, February and March seemed to return some normalcy to the valuations, but this month has picked up again, with small caps up 4% and mid-caps 2%.
Bernstein believes a pre-election euphoria is building up in Indian stock market. The Indian stock market is likely to see profit-booking after the Lok Sabha elections and the results will be the trigger, said brokerage firm Bernstein. It believes a pre-election euphoria is building up, where the previously set expectations of continuity of power are further augmented by the ruling party coalition possibly winning over 400 seats.
“With sky-high expectations having set in, a number near to the 2019 value might trigger a short-term negative reaction, but we believe a profit-booking post-elections is coming anyway, and the election results will only serve as a trigger point for the inevitable,” Eventually, the macro story will take over, and as it stays healthy, the analysts expect modest downsides. They expect manufacturing and capex stories will remain a key theme irrespective of the seats garnered.
The brokerage house noted that some polls project as high as 411 seats of the ruling National Democratic Alliance (NDA), and given the recent performance in state elections and the results of almost all major opinion polls, 390-400 seats have become the new base case.
“A correction is inevitable, and markets that are simply looking for a reason to fall may overreact to a sentiment that may not mean much rationally. On the face of it, 300 seats will still mean the ruling party getting the absolute majority, and a construct similar to 2019, which is, in fact, a continuity of power as well as a continuity of extent of power. Still, it will be seen as a “below consensus” result, and a reaction cannot be denied,” the analysts said.
This can eventually start the end of the current market frenzy, which has lasted for a full year, they added.
The domestic stock market started the year 2024 at record valuations, particularly in the small and mid-cap space. After continuing the run in January, February and March seemed to return some normalcy to the valuations, but this month has picked up again, with small caps up 4% and mid-caps 2%.
However, Bernstein believes going ahead, the focus on manufacturing, which has been very high in the recent manifesto, is expected to continue. This is also an area targeted to improve the unemployment situation, so getting fewer than expected seats may only embolden the government further to double down on this vision.
Buy or sell stocks: Following strong global market sentiments on ease in the geo-political tension, the Indian stock market finished higher for the second straight session on Monday. The Nifty 50 index gained 189 points and ended at the 22,336 level, the BSE Sensex surged 560 points and closed at the 73,648 mark whereas the Bank Nifty index closed 350 points northward at the 47,924 level. The cash market volumes on the NSE were lower at Rs.0.95 lakh crore. The broad market indices rose more than the Nifty 50 index even as the advance-decline ratio rose sharply to 2.8:1.
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