The NDA's rout or call it humiliation in the Bihar Election could not have come at a worse time. India has underperformed global peers badly this year and in particular developed markets.

Here are 5 reasons why you should stay away from the markets at least until the New Year.

1) US Fed set to increase interest rates in the US

The US jobs data, which came in on Friday was extremely strong suggesting that the first interest rate hike in the US could be in December.

2) NDA debacle in Bihar means reforms are on the backburner

Markets are worried that the NDA defeat in the Bihar elections would result in more populist measures and reforms would be on the backburner. That could be partially true. It would be keen to see what the government does in the next few months and whether the reforms process gets stalled. After all, the government's pro reform and development agenda has had no takers with the electorate. They lost Delhi and Bihar and that too very badly.

3) GST Bill maybe in a limbo

The Goods and Services Tax (GST) may now be in a limbo, as the opposition led by the Congress may get bolder after BJP's debacle in Bihar. This is one piece of reforms that the markets are eagerly awaiting. If it does not go through in the Winter session of parliament, it may result in investors, particularly Foreign Portfolio Investors starting to get disillusioned with the government's reform process.

3) Corporate results have been bad

Corporate results seem to be getting even worse. Nothing seems to be taking off on the ground. L&T, which is a reasonably good proxy for the economy, has said that revival may take a few more quarters. It's been almost a 18 months since the new government has taken over and things have not improved for the corporate sector in India.

3) Future interest rate cuts unlikely

Interest rate cuts are unlikely to happen and the RBI governor has already frontloaded interest rates. This is not good news for the markets.

Conclusion

It's a good idea to stay away from the markets at least until early next year. Markets are not going to go up in a hurry. It's a good idea to wait for the next two months and if you find markets are at least 10 per cent lower going into the new year, it maybe a good time to invest.

GoodReturns.in