After the 30-share Sensex and the broader Nifty reacts wildly to TDP’s (Telugu Desam Party) exit from the NDA bumping 332 points on Friday, experts and analysts say that the stock markets could see further volatility in the near-term especially due to politics. In a recent interview to FE Online, Anshul Mishra, Equity Fund Manager of Union Asset Management Company said that FY 19 is likely to remain a volatile year for the stock markets on the back of political uncertainty in H2 FY19 given important state elections, and approaching general election in 2019. Hence, with many state elections due in the second half, we may see increasing volatility.
“Market’s in my view had more or less factored in TDP’s exit from the NDA after its Ministers’ exit from the Union Cabinet and the vociferous disruption of the ongoing session by its MPs of both the Houses of Parliament. BJP’s shock defeat in the UP by polls and the prospect of SP and BSP forming an alliance in 2019 polls and it’s likely adverse impact on BJP’s tally from UP in 2019 is what has got the market concerned,” Ajay Bodke, CEO & Chief Portfolio Manager PMS Prabhudas Lilladher told FE Online.
Taking stock of NDA’s exit, Bodke said that it will be crucial for the BJP to trounce Congress in the upcoming State elections in Karnataka and more importantly overcome anti-incumbancy and retain power in MP, Chattisgarh and Rajasthan. “Indian markets now face twin challenges- a rampaging Trump trying to wage a trade war with US’ trading partners and it’s disruptive fallout on global trade as well as political issues weighing on the Indian domestic front,” Ajay Bodke said adding that the downside tough looks limited in Indian equities due to a likely strong rebound in corporate earnings over the next 2 quarters and easing of global oil prices providing a relief on the macro front.
Anshul Mishra of Union AMC said that apart from the political uncertainty back home, the rising global risk free rate could also weigh on the stock markets. “US 10-year government bond yield is at ~2.9%, and domestic yields have also inched up. This has been on the back on inflationary expectations,” he said.