Pre-election rally over, expect 5% correction: report

BJP within striking distance of 272 mark

The rally in the stock market ahead of the elections may have already played out, and there may be as much as a 5% correction in the days ahead.

However, such a fall should be used as a buying opportunity, according to a Bank of America Merrill Lynch India Equity Strategy report which predicts that the market will end the year higher than the levels it is at now.

“We continue to be positive on the markets and expect markets to be 10% higher than current levels by year-end. However, markets are up 16% over past 6 months and the pre-election rally has played out. We would expect markets to correct 5% by May 16th, the counting day, as investors cut some positions to hedge against an unexpected election result. This may offer a better opportunity to buy India,” said the report authored by research analysts Jyotivardhan Jaipuria and Anand Kumar.

The report added that the Bharatiya Janata Party(BJP) continues to lead the race to form the next government.

“As per the recent opinion polls, the BJP-led alliance including TDP could potentially win 245 to 265 seats, within striking distance of the halfway mark, i.e. 272 seats,” said the report dated 4th April.