The Karnataka results are out and as expected the Congress has won the elections. I had predicted that the markets would do well till May and here we are a rally of about 1600 points on the Nifty. What lies next for the markets?
1. After the Karnataka elections now there will be people clamoring saying that the BJP is finished. 1 swallow does not make a summer. There would be elections at State level but Modi Government remains set for third term in 2024.
2. The monsoon forecasts do not look too good and that should cap a runaway rally in the markets. The monsoons have been good for at least the past 4 5 years and now right now a poor monsoon is on the cards.
3. The markets have rallied about 1600 points from the bottom in Jan Feb and are now within touching distance of previous highs. A correction is round the corner.
4. The recession has started in US and huge layoffs in IT companies in the US and in India are also muted pay hikes. The sentiment has been damaged. when the sentiment is damaged, people start spending less money. It is a self fulfilling prophecy.
5. We have come to the end of the rate hike cycle and that should bring relief to the home loan folks.
The markets should correct and that gives us a chance to reflect on what next to be done.
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