Sunday, October 11, 2015

Bihar elections will be decisive turning point for next 6 months

The markets rallied 3 pc over the week and exit polls for Bihar have turned up interesting probabilities. Various polls have given contrasting views and the next 1 month till the results on November 8th are the key. Let us explore the possibilities.

1. 1 poll gives the BJP a narrow majority while another poll gives the JDU led alliance a clear majority. It is very clear that the elctions will be closely fought and the BJP may just lose the elections. The reason is BJP won 38 pc of votes in the Lok Sabha and they need to win more to win. All State elections that have followed the Lok Sabha elections, their vote share has been less than the Lok Sabha.

2. The votes have polarised and it is too close to call. If BJP loses, in a knee jerk reaction the markets may go down but if the BJP reaches out to other parties and get key legislation cleared then the markets will rise.

3. I am clear about 2 things in mind. Within the next year the markets will visit 7200 and 10500 once. Which comes first is anybody's guess.

4. The Results season will see markets in a range typically with stock specific movements. The markets thrive on surprises and one may just see the markets surprise.

5. Now, is the time to wait and watch or invest in fixed income schemes. These rates are going to stay low for at least next 2 years.

6. The FIIs have started buying and that is shown in the markets moving up. Wait for 8200-8350 to be taken out clearly before further moves.

October is a month of caution.