Lok Sabha 2024 poll result on June 4:Brokerage expectation, market strategy

Here's how leading foreign and domestic brokerages have interpreted the Lok Sabha 2024 election-related developments thus far, their poll outcome scenarios and market strategy

With only the last phase of the elections now pending (scheduled for June 01, 2024), all eyes are now set on the exit poll outcome and then the counting of votes on June 04. Though the jury is still out on the margin of victory for the current dispensation – the National Democratic Alliance (NDA), most brokerages expect Narendra Modi-led NDA to cross the majority mark and form the next government.

A common thread that runs through most brokerages is the expectation of continuity in reforms post the formation of the new government. While the markets are likely to give a thumbs up to the NDA’s victory, brokerages do not rule out a sharp rally following the news, which eventually leads a market-wide profit booking, albeit only for the short-term.

Once the ‘election fever’ settles, they expect the other domestic cues – market valuations, the government’s 100-day agenda and then the full budget likely to be announced later in 2024 – to take centre stage. That apart, global cues such as oil prices, geopolitics, interest rate policies of the global central banks and the US election to dictate the market trend back home.

"All sorts of permutations and combinations are possible, and it would be naive to even try to predict the outcome. Experience suggests these predictions are often wrong, as voters in the world's most diverse country cast their ballots with many considerations in mind," said Jitendra Gohil, chief investment strategist at Kotak Alternate Asset Managers.

In this backdrop, Kotak Alternate Asset Managers decided to maintain a status quo as regards their portfolio with a neutral equity allocation and a 75:25 allocation to large-cap & mid-cap stocks. 

"We recommend investors cut leverage and rotate portfolios towards defensive sectors. In our view, a large part of the optimism is already priced in, while disappointment is not. Therefore, the risk-reward is skewed slightly towards a buy-on-dip strategy, rather than going all in," Gohil wrote in an equity strategy recent note.

While the intensity of the impact on financial markets could vary depending on the election outcome, UBS said past instances suggest the significance of election results diminishes over the medium-to-long term. Market underperformance, they said in a recent note, tends to reverse as both investors and businesses adapt to new government policies.

Here’s how leading foreign and domestic brokerages have interpreted the Lok Sabha 2024 election-related developments thus far, and their poll outcome scenarios.

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