Bulls Roar on Exit Poll Hopes

The weekend brought good news for Dalal Street as the anxiety surrounding potential foreign investor sell-offs appeared to dissipate, at least if the exit polls are to be believed. Major exit polls unanimously suggest a comfortable majority for the Narendra Modi-led NDA, paving the way for another five-year term governing the world’s fastest-growing large economy.

News18’s poll forecasts 355-370 seats for the NDA with a 40 percent vote share, while the INDIA bloc is projected to secure 125-140 seats with 20 percent of the vote. The stock markets responded positively, with the Sensex climbing 3.11 percent to 76261 points by afternoon. While a robust jump, it’s worth noting that the Sensex had already touched 75400 levels in late May before experiencing a dip. This suggests the market had largely factored in an NDA victory, and recent jitters have now subsided.

Counting Day Jitters Remain

Investors are now pondering the market’s trajectory as vote counting commences tomorrow. If the actual results align with exit poll predictions, expect a continuation of the current market sentiment. However, any significant deviation, whether positive or negative for the NDA, could trigger market volatility. A weaker-than-expected verdict for the NDA could lead to a more pronounced market reaction. Yet, it’s crucial to maintain a long-term perspective, as short-term market fluctuations should not dictate long-term investment strategies.

After post-election result dust settles, market focus will revert to fundamental economic factors. The full Budget will garner attention, although the interim budget already signalled the government’s commitment to fiscal discipline. Unless the government unveils substantial reforms or tax measures, potentially emboldened by a stronger electoral mandate, the budget’s impact might be moderate.

The monsoon’s performance is a crucial element that could boost the economy and corporate earnings in FY25. An above-normal monsoon forecast raises hopes for increased agricultural output and reduced food inflation, offering respite to consumers and industries alike. Lower food inflation could also provide some comfort to the RBI’s Monetary Policy Committee as they consider the timing and extent of interest rate cuts.

Social Lending Impact Gains Momentum

In parallel to market movements, Shriram Finance’s successful fundraise of $468 million through social loans underscores another significant trend. This multi-currency syndicated term loan, the largest of its kind for a private sector NBFC, reflects growing global confidence in India’s financial sector and a rising interest in social impact investments. The funds are earmarked to empower small entrepreneurs and vulnerable groups across India, highlighting a commitment to financial inclusion and sustainable growth. This move signifies a positive shift towards responsible lending practices, where social development is becoming as important as financial returns.

India’s Q4 GDP growth of 7.8 percent, driven by investments and manufacturing, paints a promising picture. As investors assess earnings and future prospects, the combination of a stable political outlook and increased focus on social impact lending creates an interesting scenario. While Nifty earnings are projected to grow at a CAGR of 15 percent for the next two years, the market’s trajectory will depend on sustained investor confidence and the effective execution of both economic and social development initiatives.

What should investors watch out for? Beyond the election results and budget, keep a close eye on monsoon progress and global investor sentiment towards emerging markets. Sustained economic growth coupled with responsible financial practices will be key to unlocking further market potential and broader societal progress.

Image Courtesy: X (BJP)