Dec 2018 State Election Results – Impact & Analysis

Why Positive Markets?

The market was expected to be negative and have a downward direction. But surprisingly, the market was in green.

The market was positive even after the news of RBI governor Mr. Urjit Patel resigning and even after BJP losing in all the states.

The reason behind this is that, days like these, example election result days, are managed by Domestic Institutional Investors (DII’s). And LIC is the biggest participator of this management. Almost `2,200 crores worth buying was done by the DII’s. That is why one should look at the reactions of the market on the next day, or after one week or one month or 3 months. Next 3 to 4 months are going to be very crucial to note the market reactions. The markets will remain volatile until the Lok Sabha elections in 2019.

Staying & Getting in the market

Until the general election the market will remain a little sluggish.

This is the best time for investors to develop their portfolios.

Investors having SIP’s should not stop them and continue with their SIP’s.

Investors should not make excessive and bulk buying right now. There might be some good buying opportunities in the coming months.

Resignation of Who is the New RBI Governor

Mr. Urjit Patel has resigned from the post of RBI governor stating personal reasons. But it is not confirm whether they were really personal reasons was there too much pressure on him. One reason behind the resignation could be that, the RBI has a lot of Reserves & surplus with itself. The government wants to, in this bad economic condition especially agricultural sector, use this reserves & surplus. This will provide a support to the economy but also has some political advantage.

The Real Market Reaction

The market went positive even with two negative events (RBI governor resigning and BJP losing in elections). Obviously, the reason as mentioned above was the management done by the DII’s. The actual market (one which is not managed) will react after all the current fuss settles down.

Future Election Results Economy & Markets

It can be noticed since in 2014 is that the elections results have been clear. That is whatever the result, there was clear majority. The democracy (or the people) have clear stand on who they want. This is a good sign and very good for the markets and the overall economy.

Even if coalitions happen, they should happen before the elections and not after. Coalitions made before the results are more beneficial to the market and economy.

In the future elections too, clear majority should be preferred. This will definitely have positive impacts.

Suggestions for Investors: –

• Don’t stop the SIP’s and keep investing stagnantly and manage the allocations continuously.
• Lump sum investments should be avoided. (Except for in the case of market experiencing huge corrections)
• The fundamentals studied for selection of investment should be done carefully.