Even as market participants gear up for Karnataka assembly elections 2018, Nilesh Shah of Kotak AMC says that these polls will be considered a precursor to the 2019 general elections by the markets. According to the expert, as one year is too long in politics, the impact may be transitional if the events unfolding after the polls indicate a contrary trend.
“The Indian market is facing deteriorating macros with higher oil prices and rising US interest rates amid global trade wars. Rising crude prices can impact India’s twin deficits — trade and fiscal — adversely,” Nilesh Shah told The Indian Express.
Taking stock of the domestic macros Shah pointed out that India’s IIP numbers for the last four months are above 7%. “GST collection has crossed Rs 1 lakh crore, and tourist arrivals have crossed the 1 crore mark. Cement and steel factories are running at higher utilisations,” he said.
Further, Nilesh Shah notes that after demonetisation, domestic investors are showing an increased preference for financial assets, and FDI is also increasing at a record pace. “The JAM (Jan Dhan-Aadhaar-Mobile) trinity has ensured a fair distribution of subsides. The economy is gaining momentum despite macro concerns about oil and trade wars,” he notes.
At such a moment, the stock markets will look for comfort in political stability. So, how should the investors trade ahead of the elections? “There is no sure way to predict election results. If the market is pricing in stable government, may be it is worth taking some profit out,” said the expert.
Taking stock of the upcoming Karnataka elections, Ajay Bodke, CEO & Chief Portfolio Manager PMS Prabhudas Lilladher told FE Online that an adverse outcome for the BJP in Karnataka polls will embolden the Opposition’s shrill criticism of government’s economic policies creating roadblocks for future reforms. “Conversely, a favourable outcome for the BJP will strengthen its resolve to carry forward the momentum in the next round of assembly polls in October 18,” he said.
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