Could the Indian stock market crash further by the Lok Sabha election results?

The recent spike in Indian stock market volatility is likely to continue in the coming weeks, with the benchmark Nifty 50 index expected to rise further in the coming weeks as uncertainty prevails over the outcome of India’s parliamentary elections. There is a possibility that it will be revised by 2-3%. According to experts, June 4th.

However, market experts believe that the volatility caused by the election results is short-term and that investors should buy blue-chip stocks during the crash in the long-term, and the medium- to long-term outlook for the Indian stock market. We remain optimistic about this.

Experts LiveMint spoke to said they expect high volatility to continue leading up to the election results. They believe market sentiment is likely to remain volatile due to a variety of factors, including rising valuations, lackluster fourth-quarter results, evolving geopolitical conditions, and a lack of significant positive catalysts. It emphasizes one thing.

Nifty has fallen more than 4% from its all-time high of 22,794.70 on May 3. Some experts expect further correction in the index.

In intraday trade on Monday, May 13, the Nifty 50 fell over 1 per cent to 21,821, while the India VIX rose over 16 per cent to hit a 52-week high of 21.49.

Also read: Stock market crash: Why is the Indian stock market falling today? — We explain the 5 main reasons

G. Chokkalingam, Founder and Research Director Equinomics Research Private Limited He doesn’t think the Sensex and Nifty 50 will crash more than 2-3% in the next three weeks. However, the mid-cap and small-cap segments are likely to suffer even greater losses.

“The market will remain under pressure for the next three weeks. Nifty 50 may fall another 2-3 per cent. Small-cap sector may fall another 10 per cent,” Chokalingam said. .

“Historically, we have seen markets tend to be volatile ahead of election results. We expect volatility to continue over the next three weeks. Nifty corrects by 3% from current levels There is a possibility that we could see a correction in the mid-cap and small-cap space of 5-6 per cent,” said Pankaj Pandey, head of research. ICICI Direct.

Although markets may have already priced in a return of the Bharatiya Janata Party-led NDA to power after India’s 2024 parliamentary elections, market tensions are still evident.

CEO Atul Palak said: “Given the lack of positive catalysts, the market will remain weak. We are paying close attention to the margin of victory for the BJP-NDA government.” Biggle.

Also read: 2024 parliamentary elections: The market is almost gone INR10 million in one week. Will the decline continue even after the results?

Election anxiety is not the only factor

While tensions ahead of the Lok Sabha election results are one of the most important reasons behind the current market volatility, experts say rich market valuations, geopolitical conditions, persistent inflation and new He said several other factors are keeping the market volatile, including a lack of positive catalysts. Market sentiment is low.

“Given the high valuations of some mid- and small-cap stocks and the ongoing Middle East wars, the entire world is unstable due to concerns about inflation and postponement of interest rate cuts by most countries. Therefore, in the near term, “The market could be volatile,” said Diwakar Rana, senior equity research analyst. wise stocks.

Some analysts have pointed out that the large outflow of foreign capital in the Indian stock market is making domestic investors nervous.

“Pressure on the Indian stock market is mainly due to FII selling. FIIs have already mostly sold off this month.” INR2500 billion yen in cash. This is not due to concerns about the election results. That’s because the Chinese economy has reached a bit of a limit, so trade has changed from ‘selling China and buying India’ to ‘selling India and buying China,”’ said VK Vijayakumar, chief investment strategist. Stated. geojit financial services.

Mr. Vijayakumar highlighted that unlike the Indian market, valuations have become very cheap due to the continued sell-off in the Chinese market that started about a year ago.

“The PE ratio (price/earnings ratio) of the Hang Seng Index was less than 9 times, but the PE ratio of the Shanghai Composite Index was about 10 times.The PE ratio of the Indian market was over 19 times.This is because India’s valuation is relatively high. It’s triggering a sell-off.”India is buying in China,” Mr.Vijayakumar said.

Market expects victory for Bharatiya Janata Party

Experts believe the market is still hopeful of a return of the Bharatiya Janata Party-led NDA to power. Negative surprises can confuse markets.

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Shiva Subramaniam, IC Member and Asset Class Leader white space alpha He said the expected victory by the NDA will be positive for the domestic market and signals continued investment policy in infrastructure, manufacturing and prudent fiscal management. However, if NDA wins by a narrow margin, it could cause short-term market pain but could be an overall positive. If the opposition coalition comes to power, the market could experience a sharp correction.

However, markets will gradually shift their focus to macroeconomic trends, inflation, rate cut trends, and geopolitical developments.

Mr. Vishal Jajoo, Co-Fund Manager ITI mutual enjoymentMr. d said that the stock market was generally reacting favorably to the election results. However, there may be short-term fluctuations in the months leading up to the election. However, given the strong fundamentals, the market is likely to remain strong over the long term. More importantly, India’s story will have a long-term impact.

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