Markets set to cheer UPA Victory, expect Spectacular opening

The Results of General Assembly elections might have taken even the pundits of politics by surprise, however even a layman can tell you that markets are going to sky rocket on Monday. Yes, predicting Monday’s market opening is not a rocket science anymore. After a gap of 25 years, the Indian voters have been able to give a clear mandate to a single party to form a government and markets could not have wished better than this.

A 800-1000 Points gap up Opening Possible

Markets have built in an expectation of hung assembly and have been caught on a wrong footing! It is very likely that there will be mad rush of traders, who built on hopes of hung assembly and taken significant short positions, to cover up their trades and this may push sensex intraday rise in the range of 800-1000 points. Investors are advised to be cautious and not to buy shares on Monday for Investment purposes and wait for the euphoria to die down. However, traders can make a killing as the markets turn volatile.

I see these results as an opportunity for the markets to cheer up as the stable government would be able to take up reforms at a much better pace as compared to last 5 years since communist would not be seen in the new parliament. After the news of Global Recession, there was no major reason for markets to hold up and hence they are not likely to miss this opportunity.

FII’s are also expected to speed up their investments since they have more clarity on the political front. Domestic Investors and Mutual funds are also expected to jump on the bandwagon.

Which Stocks likely to move up?

Virtually every stock on Nifty is expected to move up since this would be a secular and broad based rally. However more focus will be on stocks which fall under sectors where the UPA government is going to focus as a part of its Manifesto.

The UPA Manifesto has out emphasis on Rural Development Schemes and Infrastructural development projects. Hence Stock of companies related to Agricultural products like irrigation and Fertilisers are set to catch fire. Keep an eye on Stocks like Nagarjuna Fertilisers and Jain irrigation. Infrastructure related companies in field of Power, Cement and Construction will also see a significant catch up. Keep a watch on stocks like ACC, GVK Power & BHEL .

Congress Manifesto also provides thrust on Education. With this stock like Educomp Solutions and Aptech are likely to remain in Limelight.

Another segment likely to fire up will be banks. Rumors are that the government may soon announce another stimulus package to drive further liquidity in the markets and decisions can be taken on revising the Bank Rates. Keep an eye on stocks like PNB and SBI and HDFC Bank.

Besides the Manifesto, the Ruling party is also expected to bring back on track its program of disinvestment in PSU companies. This had hit roadblock due to strong resistance from Left parties. Though this may not be on immediate agenda of the government, it would pave the way for Re-rating of the PSU stocks.

How long will this Rally continue ?

This a hard nut to crack. Though the new strong government has given a reason for sensex to rejoice, it would at best be a short term stimulus. The fact is that the Global economy is still in the clutches of recessionary forces created by its ill-doings. India being a open economy cannot escape the burnt. However, the First quarter result has not been as bad as thought of. This shows that the impact of slowdown in India (caused by global recession) would be lesser than perceived.

The best thing India and its government did was to get proactive in dealing with the situation. This is the difference between U.S. and India. They woke up only after ruining themselves while we were proactive enough to take steps to combat the slowdown. This may led us to believe that the worst is behind us and sensex may not retest its earlier lows. However, a lot depends on the global scenario in the coming quarters and any adverse development may well leave scars on our markets too.