Lok Sabha Elections: How will exit polls impact D-Street? Here’s what investors can expect

Domestic equity indices finished yet another session full of seesaw moves on a mildly positive note, with the Nifty50 managing to hit a five-day losing streak, as investors awaited the predictions of exit polls over the weekend following a seven-phase polling exercise from April 19 to June 1. All eyes are now on the outcome of the Lok Sabha elections in the massive, six-weeks-long polling exercise to elect a new government in the world’s largest democracy, due on Tuesday, June 4.

Meanwhile, a poll of exit polls predict that the ruling BJP-led National Democratic Alliance (NDA) will win the 2024 Lok Sabha Elections. Many analysts see this spelling good news for Dalal Street after days of volatile trade.

Triggers to watch out for next week

Trading in the equity market will largely depend on two major events this week - the general elections result and the Reserve Bank of India (RBI) interest rate decision - analysts said.

"All eyes are now on the most significant event of the past five years — the outcome of the Lok Sabha elections, scheduled for Tuesday. Before that, market participants will react to the exit polls on Monday.

"The market is approaching the event with caution, and the positive surprise from exit polls can lead to a rally as the majority of the exit polls are giving 350+ seats to the NDA. Conversely, a negative surprise from actual results might trigger a knee-jerk reaction in the market," said Santosh Meena, Head of Research, Swastika Investment Ltd.

Echoing a similar view Narendra Solanki, Head Fundamental Research - Investment Services, Anand Rathi Shares and Stock Brokers said, "The exit poll numbers are very strong for the incumbent government and markets may not have priced in such strong numbers and we could see some reflection of that on Monday opening trade."

Solanki added overall it's positive for the markets in the short as well as long term. Also, he said that the recently released Gross Domestic Product (GDP) growth data should provide support for existing positive momentum.

Further, Swastika Investment Ltd's Meena said that following the election outcome, the next major trigger will be the RBI policy announcement scheduled for June 7, added.

"A key aspect to monitor will be the behaviour of foreign investors in the aftermath of the election results. On the global front, macroeconomic data from the US and China will also play a significant role in shaping market sentiments," Meena said.

Manufacturing and services PMI data for May are scheduled to be announced during the week.

"Exit polls results, which indicate a clear victory for the NDA with around 360 seats completely remove the so-called election jitters which have been weighing on markets in May. This comes as a shot in the arm for the bulls who will trigger a big rally in the market on Monday," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

The bulls will be further emboldened by the better-than-expected 8.2 per cent growth in GDP numbers for FY24 which came after market hours on Friday, he added.

As per a report by Emkay Research, "Final outcome, if in line with exit polls, would likely calm investor nerves as political and policy continuity will be good for risk assets in the immediate run and macro stability in the medium term." Last week, the 30-share BSE Sensex tanked 1,449 points or 1.92 per cent while the NSE Nifty plunged 426.4 points or 1.85 per cent.

The BSE benchmark hit an all-time high of 76,009.68 on May 27. The Nifty also reached its lifetime peak of 23,110.80 on May 27.

Arvinder Singh Nanda, Senior Vice President, Master Capital Services Ltd, said, "Historical trends from the previous two elections outcome in 2014 and 2019 have shown patterns, where the market closed with minimal changes after experiencing significant volatility during the early trading hours."

(With inputs from agencies.)

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