Jubilation among investors is expected to see share prices rise sharply when the market opens on Monday, on hopes that economic reforms would be back on the agenda.
“It is almost as though investors had pressed the ‘pause’ button on major decisions on account of ‘uncertainty’. With the clear mandate for the new government and the strong expectation of stability for the next five years, the ‘play’ button will be on. If global cues continue to be positive, the ‘play’ could even become a ‘fast forward’,” said Madhabi Puri-Buch, managing director & CEO of ICICI Securities.
“The possibility that the United Progressive Alliance (UPA) could form the government without the Left would further soothe investors’ nerves,” said Dinesh Thakkar, CMD, Angel Broking.
India needs to take steps to increase capital inflows to give a boost to the sagging economy, weighed down by the recession in the developed economies. Investors expect the government to decide on disinvestment of stakes in several PSUs to meet part of the fiscal deficit, which would act as an additional impact on the equity market.
The markets are expected to rally as fresh money from FIIs and those waiting on the sidelines, on account of the political uncertainty, make their way into Indian stock markets. Market players advised investors remain ‘long’ to take advantage of the long-term wealth creation opportunities that markets have to offer.
“I am of the view that Indian equity market will see huge portfolio inflows in months to come and market likely to remain bullish as other fundamental factors such as interest rates, valuation, inflation and GDP growth remains on track,” said Vikram Kotak, CIO of Birla Sunlife Insurance. Most global investors are under-weight on India and also domestic institutional and individual investors are sitting on substantial surplus.
“We are bullish on banking, infrastructure and telecommunication sectors. The markets are expected to gain 15 per cent — may not be on Monday itself, but over the 3-4 day period that the new government is formed,” said Angel's Thakkar.