Buy after the election results 2019

In the last one week the markets have gained significantly. On Friday, the Nifty rose 150 points and on Monday, another 420 points. It lost ground on Tuesday of near 120 points, but, nonetheless the gains are near 4 per cent in the last one week.

There could be a possibility of a reduced number of seats for the NDA after results are declared on May 23, as compared to the exit polls.

Therefore, even if they are able to form a government with the BJP itself short of the 272 mark, we may see some selling pressure on election day. This means it is better to wait for the dust to settle down, after the election results are declared, which would help preserve capital.

Fundamentals not in great shape

The economy also seems to be considerably slowing down, as can be viewed from the IIP numbers as also slowing auto numbers. In fact, the auto numbers have been really bad, which has led to auto shares like Maruti and Hero Motor declining significantly. The NBFC crisis and liquidity votes continue to create problems for the economy.

The one positive is that inflation is within the comfort zone of RBI and we could see interest rates dropping further in the coming days, if crude prices remain subdued.

Global cues a major problem

Global cues too are not very supportive and the Nifty had cracked nearly 5 per cent earlier this month from historic highs, but, later reclaimed those levels thanks to the exit pollls. Trade war with China, a falling rupee and rising crude prices are all playing along. If trade wars between China and the US persist, we could see a further fall in the markets. In any case, the Indian markets look over priced at the moment, and unless we see another 8 to 10 per cent fall in the indices, markets do not look interesting.

The next 1 week is going to be interesting, brace yourselves for some immense volatility.

Look for quality midcap and small caps

If there were to be a stable coalition, it is highly possible that we could see the broader markets outperform the indices. For long investors have pushed money into the big names like the HDFC twins and Reliance Industries. We might continue to see large amount of gains in these stocks.

However, these stocks tend to be very volatile and one needs to buy into quality names.

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