Shankar Sharma's market strategy post Lok Sabha exit poll: Stay strapped in

The impact of the outcome of elections on the stock markets is very, very fleeting, said Shankar Sharma, founder, GQuant Investech. What matters more, he said that India remains on a firm fundamental footing and nothing can derail the growth story.

“Elections matter for the markets. However, just like budgets, the lasting impact on the markets is very, very fleeting. What matters more (for the markets) is the performance of the government. No matter what happens in the elections – this one, or even the next Lok Sabha election in 2027, India is on an amazing growth trajectory and I do not see anything that can derail the ‘India growth story’ for years and years to come. For investors, stay strapped in,” Sharma said. 

Meanwhile, the National Democratic Alliance (NDA) is set to come back to power for the third consecutive time with Narendra Modi securing a third term as India's Prime Minister, suggest Lok Sabha exit polls unveiled on Saturday, June 1. The counting of votes is scheduled for June 4. 

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The narrative of 'Abki baar 400 paar' according to two pollsters – News 24-Today's Chanakya and India Today-Axis My India – could become a reality, as they forecasted the NDA to win 400 seats (+/- 15 seats) and 361 - 401 seats, respectively.

The I.N.D.I.A bloc, on the other hand, these two poll forecasters said, is likely to bag 107 seats and 131-166 seats, respectively in the recently concluded seven-phase Lok Sabha elections 2024.

The seven phases of the Lok Sabha polls 2024 have been a volatile period for the Indian stock market that has seen India VIX - a gauge of volatility in the markets - oscillate between 10 and 26 levels during this period, data shows.

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Although the link between voter turnout and election outcomes is not straightforward, analysts said, the drop in voter turnout had introduced an element of uncertainty that reverberated through the stock markets.

After the outcome of the elections is known later this week, the next big event for the markets is the outcome of the Reserve Bank of India’s monetary policy in June, and then the full budget that will be presented by the next government, likely in July.

WATCH VIDEO: Shankar Sharma on Markets, budget, elections and the stock market bull-un
 

"In the near-term, all eyes will be on the July budget for changes in direct or indirect taxation, MSP policy and MGNAREGA payments assuming that the NDA will return to power. In the long-term, however, the focus would be on infrastructure development, farm laws, skill development, and creating employment on the manufacturing side to spur demand from rural India," wrote analysts at Mirae Asset in a recent note.

Strong foundation

Meanwhile, every government since 1991, Shankar Sharma said, has performed exceedingly well in different ways and with different strategies. The bigger goal amid all this, he believes, has been to make India a global superpower. 

“The results of the foundation laying ceremony of 1991 are all visible for everybody to see today. We have grown nearly to a $4 trillion economy now – a 20x increase in around 33 years. This has come with rapidly improving fundamentals on the macro side,” Sharma said.

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So, is there anything that can create a ‘trouble in paradise’ then?

Sharma believes there will be a problem emerging only if there is a major dislocation globally; but other than that on a standalone financial basis, he believes, India remains in an ‘amazing place’ for stock market investors. 

“Ride through the volatility and do some rotation away from laggards from the large-caps into a bunch of quality small-caps and you’ll be fine,” Sharma advises.