Sensex jumps 3,700 points in 9 days. Why is no one waiting till election results?

Being a forward-looking animal, any good or bad news is priced well before the actual event. In this case, aren't waiting till the on June 4 or even the results on June 1.

PM Narendra Modi had yesterday told newspaper that both the market and the will hit record highs on June 4. In another interview, he had said market participants would get tired of punching orders in a post-election rally.

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While it will be known only on June 4 whether his prediction will come true, global brokerage firm 's short-term target of 23,000 on has already been breached.

Noting that there is a higher probability of winning around 330-350 seats, Bernstein had on Tuesday said it expects a short-term rally either leading into elections or the week after results potentially breach the 23,000 target and then a profit booking as the reality of execution and valuations emerge.

"Continuity of power was known to , which is why we had a rally in Nov/Dec last year - playing again and again on the same theme leads to absurd outcomes for valuations - hence, we believe the focus will eventually return to macro, earnings growth, reasonability of valuations etc. The overanalysis-based self-induced stress the markets have seen over the past month is the only reason for the relief rally we call for," said Venugopal Garre of Bernstein.

His thesis for continuity of power is based on various pre-poll surveys, and the "lack of visible anti-incumbency wave".

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If the BJP wins 290 plus seats, the brokerage sees an immediate market rally followed by short-term profit booking. High single-digit or low double-digit returns for Nifty is likely this year.

In the near term, analysts say the chances of the market going up further are less given that it has already touched record-high levels, and in case the political equation changes, the market can fall as much as 15% on June 4.

“Nifty is slightly overvalued among emerging markets but nonetheless the election outcome is largely discounted and factored in the market price. Therefore, the possibility of positive surprises is less and any downside surprise is higher, which may have its impact on the market movement,” Viraj Gandhi, CEO, , says.

Fear around a repeat of in 2004 is making markets nervous as the unexpected event had resulted in a 15% cut in the Sensex in a single day.

FIIs are another headache as they have already pulled out Rs 28,000 crore from Indian markets in May so far.

Chris Wood of has already warned that if the China trade remains the current focus in Asia, emerging market investors may no longer be overweight India.

Pointing out that more expensive midcaps have continued to outperform bluechips with midcaps accounting for about 60% of inflows but only 30% of market capitalisation, he said Nifty Midcap 100 has risen by 66% since the start of 2023 while Nifty is up only 25% over the same period.

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