BJP’s anticipated win fuels market rally: What to expect on June 4

The stock market saw a rally with the Sensex reaching an all-time high on the back of exit poll predictions suggesting a BJP win.

The stock market witnessed a rally on Monday in response to exit polls suggesting a strong victory for the BJP-led NDA in the Lok Sabha elections.

The exit polls predict over 350 seats for the NDA, led by Prime Minister Narendra Modi. However, while the markets have reacted positively, the final results on Tuesday, June 4, could be different as exit polls have not always been accurate.

In the 2014 and 2019 elections, exit polls predicted lower seat counts for the NDA alliance than the actual results.

“Markets have reached record highs and are maintaining a positive tone, primarily due to exit poll numbers indicating political stability. As we await the actual election results on June 4, we anticipate high volatility. Participants should remain cautious, as a significant deviation from exit poll predictions could trigger profit-taking,” said Ajit Mishra – SVP, Research, Religare Broking Ltd.

“On June 4, the day of the election results, the Sensex and Nifty benchmarks could experience substantial movements, with both high and declines remaining on the cards,” said Arvinder Singh Nanda, Senior Vice President at Master Capital Services Ltd. 

‘Consequently, we cannot rule out the possibility of profit booking in the second half of the trading session following an initial upward movement,” he added.

He further said that historical trends from the previous two election outcomes in 2014 and 2019 have shown similar patterns, where the market closed with minimal change after experiencing significant volatility during the early trading hours. 

Nomura India said that it would be wrong to assume the same trend will continue, but the consensus among exit polls suggests a stable NDA government is likely.

Antique Stock Broking said that exit polls have been incorrect in past elections, including the general elections of 2004 and 2009, and the recent 2023 state assembly elections in Chhattisgarh and Karnataka.

However, in some cases, exit polls underestimated the NDA’s margin of victory, such as in the 2014 and 2019 general elections and the 2023 Madhya Pradesh state elections.

Emkay Global said that while exit polls are not definitive, their accuracy has improved in recent election cycles.

If the final outcome aligns with the exit polls, it could calm investors, as political and policy continuity would benefit risk assets in the short term and macroeconomic stability in the medium term.

Elara Securities suggests that election years have historically been positive for the equity markets. In the past four election years, the Nifty50 has delivered an average return of 32%, with significant gains occurring after the elections.

“Broader markets tend to do even better. Pre-election performance varies, but post-election rallies have historically been broad-based, resulting in positive returns across sectors. With the Nifty yielding 4 per cent in CY24 to date, there remains huge upside potential for a post-elections rally,” it said.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts and brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any investment or trading decisions.)