Bihar Elections Outcome May Change Sentiments

The equity markets in the last few days have been showing lacklustre movement. For that matter, for the entire year of 2015 the frontline equity indices have not gone anywhere after showing a stellar performance a year before.What triggered to almost 30 per cent gain in bellwether equity indices in the year 2014 was the coming of a new government at the centre. The seed of such a performance was sown after the BJP won elections in three major states in November-December 2013 and emerged as the largest party in the fourth.

Therefore, those who believe that Bihar elections are inconsequential for the equity market and will have a temporary impact, I may say they have not done their homework and have not learnt from the past.Their argument is that a win in the Bihar election is not going to help the NDA government a lot in terms of controlling India’s upper house,where opposition law makers have  blocked key economic proposals.The win in this election can at best change the number of seats in the Rajya Sabha by two.This is a fact and everybody will agree with this but it’s not just about the number game but also about an improvement in sentiments.

I believe that the Congress will be routed out of Bihar completely. The party which was number one till the 1980s doesn’t even have a decent presence in most parts of Bihar. Post the bifurcation of Bihar in 2000, its support base dwindled further as the Congress’ tally came down to a single digit in the 2005 polls. It won nine seats out of 243, while in the 2010 elections it put up its worst ever performance by winning only four seats. This year it will be difficult for the Congress to even get the number of seats it had won in the 2010 elections. In short, the party is definitely facing extinction in Bihar. This is clearly visible through the number of rallies carried out by the Congress in Bihar and the turnout of the public in these rallies.

The complete crushing of Congress in Bihar will be a big blow to party members as they are yet to recover from their worst performance in the Lok Sabha election of 2014.This might give the right and strong message to them and they may start supporting the ruling government in passing of some of the important bills such as the Goods & Service Tax (GST) that will help make the country a single market. According to various surveys conducted by different agencies in the last two months, there definitely is a good chance that the NDA will win more seats. I firmly believe that NDA is going to win not less than 140 seats.Such a victory will certainly act as a sentiment booster for the market and will help to garner more retail participation in the equity market. In the last one year we have seen that the participation of retail investors has gone up substantially either through the mutual fund route or directly in the stock market.After adding 16 lakh demat accounts in 2014, the first six months of the current year has already added 9 lakh demat accounts. As on September 30, 2015, the total number of demat accounts in the country stood at 2.51 crore.The Bihar election win by NDA will further encourage retail investors to join the equity market.Nonetheless, the recent decision by the stock exchanges to increase the lot size in derivative markets, even if it has its own merit, is not the right way to safeguard retail investors.The right solution to safeguard investors from the derivative market is to educate them through investor awareness programmes.Our cover story this time takes the initiative to educate retail investors on simple options’ strategy that they can use to make profitable trades.Besides this, we are also reviewing all the recommendations given by us in the last one year.This does not include low price and choice scrip recommendations, which we anyway carry in every issue.I would also like to inform you all that we have commenced our Investor Awareness Programme for this year and will be in your city soon. You can visit our website and register yourself to attend this programme.The aim of such programme is to share knowhows of the stock market, the ways to identify winning stocks and present opportunities.Hope you will attend this programme and benefit out of it. Please mail your comment and feedback at: comment@dsij.in.