Lok Sabha election results on June 4: Here's your stock market strategy handbook

Even though analysts believe the current market would take heart from the pollsters' predictions, all eyes will be on the big election results, scheduled on June 4.

Here's everything you need to know before the big Lok Sabha verdict

Volatile May
Even though the market has priced in the Modi government returning to power once the elections were announced, there were jitters among investors after concerns surfaced over the possibility of lower-than-expected seats for the and low voter turnout.

The bleak mood was reflected in the volatility index, which shot up as much as 87% during the last month.

While foreign investors dumped equities worth over Rs 43,000 crore last month, DIIs defied the sellers to pump in around Rs 53,000 crore during the same period.

Both the benchmark indices Sensex and Nifty ended with cuts and the broader market saw mixed trends with smallcaps losing the most.

Market reaction to exit polls
Investors are likely to cheer exit poll numbers on Monday as trends suggest that the ruling BJP-led NDA alliance will return to power by securing over 350 seats.

Analysts said largecaps in financials, capital goods, automobiles, and telecom are likely to lead the short rally before the big numbers with a mix of public sector companies in focus.

How should you play till June 4
Despite a clear trend prediction in favour of the BJP by the pollsters, one cannot rule out heightened volatility as we inch closer to June 4.

Historically, market sentiments ahead of tend to be influenced by factors such as political stability, and economic policies of the leading party.

Analysts said the current sentiment is bullish following the exit poll numbers and any correctional fall due to volatility could be accompanied by fresh buying.

Market strategy on D-Day
On the day of the election results, analysts believe benchmarks Sensex and Nifty benchmarks could experience substantial movements, with both highs and declines on the cards. If the actual numbers mirror or get close to the exit poll trends, markets might see an upward rally, taking comfort in political stability.

On the flip side, any unexpected results could trigger knee-jerk reactions in the near term.

"The Indian market is currently trading at a premium, having largely discounted the growing likelihood of the continuation of the Modi era. Consequently, we cannot rule out the possibility of profit booking in the second half of the trading session following an initial upward movement," said Arvinder Singh Nanda, Senior Vice President at .

What analysts say
Most brokerages are optimistic that the BJP will likely return to power, given the current political climate, and expect healthy gains to follow if there are no major surprises.

"We prefer largecaps due to valuation comfort. On a sectoral level, we like private banks and consumption space. As policy continuity is in our base case, we believe any dips should be bought into," said .

Meanwhile, another reputed brokerage reiterated its view that any sharp weakness in equities could offer buying opportunities despite the potential for near-term uncertainties.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of )