Market Review: Bihar Results Hold The Key As Sensex Falls 9 Trading Sessions Out Of 10

Business

oi-Sunil

By Sunil Fernandes

Updated: Saturday, November 7, 2015, 9:52 [IST]

The Sensex has fallen for the last 9 trading sessions out of 10 as a bearish mood has prevailed in the markets, despite solid global cues.

Worries over the outcome of the Bihar elections and the fact that the chances of a US Fed interest rate hike in Dec has spooked the markets. In fact, with the solid jobs number in the US, the chances of a rate hike in December is now a real possibility. This has led to some selling by Foreign Portfolio Investors.

Bad corporate results has spooked the markets, ever since companies like ITC and Larsen disappointed the markets by their results. The one solace was the decent results posted by State Bank of India and a kind of tapering of NPAs from banks like Punjab National Bank.

But, the key for the markets is the results of the Bihar elections next week. Exit polls are hopelessly divided between a majority for the Nitish Kumar led Grand Alliance and the BJP led NDA.

There is a section of the market that believes nothing much is going to change after the Bihar elections no matter who wins. At the most there could be a knee jerk reaction. The belief is that a BJP victory would increase its count in the Rajya Sabha. But, the fact is that even if the BJP alone would win 120 seats in Bihar (best possible assumption), it would add at the most one seat in the Rajya Sabha, given the fact that it already has 90 seats plus in Bihar presently.

Also, the equation is unlikely to change too much for the ruling NDA alliance in the Rajya Sabha until 2018-19 assuming that it does well even in Bihar, Uttar Pradesh and West Bengal. So, the next few years in the Rajya Sabha would be dominated by the Congress, no matter what.

But, the results against the BJP is bad news for the stock markets. This is simply because it would increase the pressure on the government from the opposition and who knows we may not have the Rajya Sabha function all over again in the winter session of Parliament. This would leave the GST in a limbo. Any further delay in the GST is likely to frustrate investors, particularly Foreign portfolio Investors.

Hence, a further fall in the markets cannot be ruled out, if the Bihar outcome is not favourable for the ruling party.

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