With NDA 2.0 Becoming A Reality, It's Back To The Basics!
Over the last week or so the big questions on every market participants’ mind was: Whom have the Indian voters voted and who will be the ‘king’ of the largest democracy in the world? On Sunday evening, the exit polls hinted at a clear majority for the incumbent NDA government and had assigned anywhere between 270 to 340 seats to the ruling NDA combine in the general elections. The exit polls trend set the tone for the bulls, as the markets were looking for stability, continuity and strong leadership rather than a fractured mandate. This has led to the record closing high in Nifty on Monday, which was followed by a new all-time high level on Tuesday as it registered the milestone of 11,884. However, market participants thereafter turned anxious as macroeconomic, global and macro-technical tailwinds still continue to very much exist and, as a result, we saw market turning quite volatile. Just before the election results counting day, the India VIX, also referred to as the fear index, spurted to a 4-year high and logged a high of 30.18 on intra-day basis. As the sun sets on May 23 and the early leads started coming in, the trends suggested ‘Abki Baar, Fir Modi Sarkar’, and Nifty touched a new milestone of 12,000 and the BSE Sensex touched the life-time high of 40,000. On the economic front, there were no major news flows this week. Meanwhile, breaking a growth streak of over 4 years, domestic air passenger traffic fell by around 4.5 per cent in April. On the global front, the US stocks have been trumped by volatility and market participants were seen switching their positions based on the news flow. Right at the beginning of the week, the news which freaked out the investors across the globe was the US technology companies have begun to comply with the White House’s ban on Chinese telecom giant Huawei Technologies. Alphabet, the Google parent company, suspended business with Huawei that requires the transfer of hardware, software and technical services. However, the next day, some trade restrictions on Huawei were eased and many traders saw this as a decline in trade tensions. But, on Wednesday, another twist to the tale was that the US Treasury Secretary Steven Mnuchin, while speaking to media reporters, said that there were no plans to go to Beijing to resume trade negotiations. This clearly indicated that the trade talks were heading nowhere and this may not be great news for the global GDP growth. Meanwhile, the Federal Reserve released the minutes from its monetary policy, which indicated that a patient approach to monetary policy action could continue for some time. The minutes also suggested that the economy appears to show a more upbeat tone, with few signs of inflation.
Indian markets have been on a merry-go-round since the beginning of May, and after Nifty recorded its all-time high level of 11,856 on April 18, it has struggled to break above the 11,800 mark as market participants were seen on the edge of the seat ahead of the general election results. However, as the exit polls eased the nerves of the market participants, bulls were on a winning pitch despite volatility. But, since the NDA 2.0 becoming a reality, history has shown that a political event as important as the general election usually brings about long-term trends in the market and is the factor that sets the stage for wealth creation. Now, going forward, focus would shift to hardcore economic decisions and the manner in which economy is handled, and also, market participants will be back to tracking US and China talks.
