Indices ended May flat. Can there be a reversal post election results on June 4?

Trendlyne data shows that the Sensex closed the month of May down 521.47, or 0.70%, while the Nifty 50 concluded the month down 74.15, or 0.33%. 

Also Read: Sensex, Nifty 50 break 3-month gains to end May in red; 5 major triggers to watch out for in June

The S&P BSE Sensex rose 0.1% to 73,961 points during Friday’s final trading session of May, while the NSE Nifty 50 finished the day up 0.2% at 22,531 points.

The Nifty 50 set a new record four times, most recently on Monday, May 27, when it hit a record high of 23,100 points. In a similar vein, the Sensex hit three record highs in May, setting a new lifetime high of 76,009 points.

According to a recent report from Motilal Oswal, the Nifty 50 index dropped to 21,821 in May 24 but made a remarkable comeback to reach a new all-time high of 23,310. Overall, it continued to be quite variable between 21,821 and 23,310, before levelling down in the vicinity of 22,600 zones.

Also Read: Lok Sabha Elections 2024: What should retail investors do after results on June 4? Experts suggest this

Will there be a reversal post Lok Sabha Election 2024 results?

Lok Sabha Election Phase 7 Voting for the final round of the Lok Sabha Elections 2024 has started today, Saturday, June 1. The results of this vote will probably determine the destiny of 904 contestants, including Prime Minister Narendra Modi, across 57 seats in seven states and one Union Territory.

The world’s biggest polling marathon, which started on April 19 and has now covered 6 stages and 486 Lok Sabha seats, will come to an end today. Voter counting is scheduled for June 4th. The Lok Sabha Elections 2024, which took place over 44 days from April 19 to June 1, are the second-longest elections in history, after only the 1951–1952 Indian General Elections.

Also Read: Lok Sabha Election Phase 7 Voting Live Updates: 11% voter turnout recorded in 57 seats till 9 am

In a research, brokerage Motilal Oswal noted that the Indian equity market would have a  knee jerk reaction based on the results of the exit poll on June 1, 2024, and the ultimate result on June 4, 2024. Over the past seven months, the Nifty index has been reaching higher lows (higher lows 18,837; 18,973; 20,183; 21,137; 21,530; 21,710; 21,777; and 21,821). The market’s primary trend continues to be favourable despite the brief volatility, at least until it maintains the development of higher lows on a monthly basis.

In the last 27 trading sessions, the brokerage reports that the India VIX had a dramatic spike from 10 to 26 zones. Since June 23, volatility has reached its greatest points over the past 24 months. enumerating the potential results. After the election results are known, volatility is probably going to decline from their height. Although the likelihood of another VIX rise is low, using a long delta strategy might be beneficial if the index is unable to maintain crucial support.

Also Read: Bank Holiday on June 1: Are banks closed today? Only in some states… Check details here

Markets and Elections – Technical Views

According to Rajesh Bhosale – Equity Technical and Derivative Analyst, Angel One, ahead of the election results, markets have cooled down from their recent highs around 23,100, as traders seem to prefer keeping positions light before this key event. The FIIs have also started the June series with a Long Short Ratio of 13%, indicating they are not going to the event with higher expectations.

Historically, when the Long Short Ratio is at the lower end, the Nifty 50 has found nearby support. Technically, prices have been trading in a rising channel pattern for over three months, oscillating precisely within this range. The current trading range according to the pattern is between 22,200 and 23,200. In a bearish scenario, a breakdown of this pattern below 22,200 could trigger a price correction phase, which would be healthy from a broader uptrend perspective. On the other hand, the 23,200 – 23,500 range remains a key hurdle.

Also Read: Stock market holidays in June 2024: NSE, BSE to remain shut on this day; check details

Markets and Elections – Stocks and Sectors in focus next week 

Mahesh M Ojha, Hensex Securities Pvt Ltd’s AVP of Research and Business Development, said that the Nifty 50 benchmark index recorded its all-time high of 23,110 at the beginning of the week (May 27-May 31). The index, however, witnessed a consistent decline of nearly 2.5% this week. 

Given the election results and the high level of volatility on June 4th, there may be significant tailwinds this coming week. Ojha thinks sectors like defense, public sector banks, public sector enterprises, infrastructure, and auto (automobile, 2-wheeler, 4-wheeler) would continue to be in the focus as we anticipate the National Democratic Alliance (NDA) Government to rerun.

Also Read: Stock market today: Sensex, Nifty 50 rise after 5-day slump; all eyes on Lok Sabha election 2024 exit poll results

According to Mahesh, the stocks in focus shall be Hindustan Aeronautics Ltd (HAL), Bharat Dynamics Ltd, Mazagon Dock Shipbuilders Ltd, Bharat Electronics Ltd (BEL), REC Ltd, Power Finance Corporation Ltd (PFC), Container Corporation of India Ltd, Oil and Natural Gas Corporation Ltd (ONGC), State Bank of India (SBI), Indian Bank, Bank of Maharashtra, ICICI Bank and Axis Bank would be the focus of attention in the private sector. Mahindra & Mahindra Ltd and TVS Motors Ltd are two auto stocks. ASK Automotive Ltd., Minda Corporation Ltd., and Uno Minda Ltd. are the auto ancillary stocks that will be in the spotlight. 

Steel Authority of India Ltd (SAIL), NMDC Ltd, Coal India Ltd, NHPC Ltd, Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) are stocks of public sector enterprises (PSEs). According to the long term and short term prospectus, all of these stocks should do well, said Ojha.

Also Read: Lok Sabha Elections 2024 trading strategy: Hold large positions; continue SIPs, says Puneet Sharma of Whitespace Alpha

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 01 Jun 2024, 10:15 AM IST

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