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"IS THERE money to be made by investing at current levels?" That is the question investors who have missed out on the rally are asking. After a 37% rise in benchmark indices since March 9, the market appears to be consolidating its gains and waiting for the election results before making up its mind.
If past trends are any indication, this may not be best time to start loading up on shares. Since the mid 90s, stock prices have risen in the run-up to a general election, and then tapered off after the new government assumed office.
At the same time, many players feel it would be incorrect to take a view based on the poll results, because global factors have contributed to the recent rally, more than local developments. Back home, the pace of deterioration in most sectors have slowed down, and this is being interpreted by most analysts as signs of recovery in the economy.
"Global factors as well the election euphoria have both contributed to this rally, but the impact of the latter is little," says Gul Teckchandani, independent investment Advisor. So far, India has been the best performer in Asia, with a 37% rise in the last couple of months, compared to others, which have risen 15-25% during the same period.
This could be partly because of election sentiment as suggested by the trend observed in past few election
JAYEETA
years (The years considered here are since mid 90s as equity market became active in those years).
Consider the previous election year, 2004. Indices gained 7% during March- April 04 (elections were conducted in April). But it shed 600 points in a single session after the results were announced. This slide continued for four months till August 04. Similarly in 1998 and 1996, market rallied around 17% and 10%, respectively during the election months. The rally continued for next two weeks till the newly elected government settled down in office. After that, shares fell about 30% in the next six months. However, 1999 was an exception to the trend. Share prices fell in the pre-election and election months in 1999 but rallied in the postelection phase.
According to technical analyst, Deepak Mohoni, this rally is a cause of pool of random global phenomena. It has very little to do with politics or elections. He says "selectively people are going for bargain hunting as prices have become attractive".
The recent rally has been fuelled by a sudden surge of foreign fund flows. Overseas investors have net bought around $2.5 billion worth of shares in the last couple of months.
"India is going to be an investment destination for foreign funds with a lower risk appetite. A fractured election verdict could however result in some consolidation in the market post elections," he says.
To sum up, it is difficult to say whether there would be a correction or not at this juncture. Election results and their deviation from market expectations hold a key for market movement in coming weeks. If there is a downturn, improved global situation and better data points hinting possible recovery in Indian industrial activity could also mellow it down.
pallavi.mulay@timesgroup.com
At the same time, many players feel it would be incorrect to take a view based on the poll results, because global factors have contributed to the recent rally, more than local developments. Back home, the pace of deterioration in most sectors have slowed down, and this is being interpreted by most analysts as signs of recovery in the economy.
"Global factors as well the election euphoria have both contributed to this rally, but the impact of the latter is little," says Gul Teckchandani, independent investment Advisor. So far, India has been the best performer in Asia, with a 37% rise in the last couple of months, compared to others, which have risen 15-25% during the same period.
This could be partly because of election sentiment as suggested by the trend observed in past few election
JAYEETA
years (The years considered here are since mid 90s as equity market became active in those years).
Consider the previous election year, 2004. Indices gained 7% during March- April 04 (elections were conducted in April). But it shed 600 points in a single session after the results were announced. This slide continued for four months till August 04. Similarly in 1998 and 1996, market rallied around 17% and 10%, respectively during the election months. The rally continued for next two weeks till the newly elected government settled down in office. After that, shares fell about 30% in the next six months. However, 1999 was an exception to the trend. Share prices fell in the pre-election and election months in 1999 but rallied in the postelection phase.
According to technical analyst, Deepak Mohoni, this rally is a cause of pool of random global phenomena. It has very little to do with politics or elections. He says "selectively people are going for bargain hunting as prices have become attractive".
The recent rally has been fuelled by a sudden surge of foreign fund flows. Overseas investors have net bought around $2.5 billion worth of shares in the last couple of months.
"India is going to be an investment destination for foreign funds with a lower risk appetite. A fractured election verdict could however result in some consolidation in the market post elections," he says.
To sum up, it is difficult to say whether there would be a correction or not at this juncture. Election results and their deviation from market expectations hold a key for market movement in coming weeks. If there is a downturn, improved global situation and better data points hinting possible recovery in Indian industrial activity could also mellow it down.
pallavi.mulay@timesgroup.com
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