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Positive Momentum

In the medium to long-term Indian equity markets are up for a positive momentum, but experts warn a post election result correction

In the past one week, equity markets continued their winning run and touched new highs. Both the Sensex and the Nifty registered 6 percent growth in the last one week. Naturally, the Indian equity markets seems to have factored in the victory of Bhartiya Janata Party (BJP) led National Democratic Front (NDA) in the forthcoming results of general elections. Market participants are in view of positive momentum of equity markets from medium to longer term. But they are certain that, markets are ripe for a correction post results.

While the May 16 outcome will provide the future direction to the market, funds managers are unanimous that investors should continue to invest in equities and not worry on short term volatile phase. Says Pankaj Murarka, head equities at Axis Mutual Fund; “Our view remains constructive and it might have some correction given the sharp move they had in the recent days. We are very confident of long term prospectus because there are clear signs of economy coming out of slowdown and improvement in growth.”

There is belief that interest rates are not likely to go up and there may be huge infrastructure spending by the new government which might revive the investment cycle. Says Harsha Upadhyaya, Chief Investment Officer-Equity at Kotak Mutual Fund; “Once the election results are announced, investor focus is likely to shift towards composition of the new government and likely policy initiatives in the run-up to the budget. Given reasonable valuations, expected improvement in economic fundamentals and corporate earnings trajectory, we expect equities to provide decent returns even from current levels.”

According to Parag Parikh, Chairman & CEO of PPFAS Asset Management Private; “Narendra Modi coming to power has been already discounted by the markets. But to expect that he has a magic wand and things will starts improving once he takes position as PM is silly. But as of now, sentiments have improved drastically and it is positive for the markets.”

There is also a belief that, only few segments of markets have seen sharp run up in the past few weeks and there is some value available in many stocks. “I believe markets have run up because the index has gone up, but there are many pockets outside the main index where investors can look up to which is yet to rally,” adds Parikh. The verdict on what investors should expect on May 16 is still mixed.