Lok Sabha exit poll on June 01: Here's your stock market strategy handbook

Lok Sabha Exit Polls: Markets, analysts believe, are likely to remain volatile in the run-up to the exit polls. The markets, analysts said, expect the NDA to form the next government

Lok Sabha Exit Polls 2024 and Stock Markets: Though the jury is still out on who will win the Lok Sabha 2024 elections in India and by how many seats to form the next government, the markets on their part have been volatile all through the seven phases of Lok Sabha polls.

India VIX, a gauge of stock market volatility, has swung between 10 and 21 levels for most of the seven phases of Lok Sabha 2024 elections in India, data shows.

When will the Lok Sabha 2024 exit poll be announced?

 

The Lok Sabha exit poll is likely to be announced post the completion of all seven phases on June 01. Political pundits expect the exit poll outcome for Lok Sabha 2024 elections to start trickling in by 7pm on Saturday, June 01.

But why are the stock markets closed on exit poll outcome day on June 01?

The Indian stock market will remain closed on Saturday and Sunday, June 01 and June 02. The Indian stock markets trade for 5 days in a week, between Monday till Friday between 9am - 4pm, which includes the pre-market and the post-market (stock price and index adjustment sessions).

On Saturdays and Sundays, the Indian stock markets remain closed for trade, unless the exchanges decide to open them for a special trading session.

The last time the Indian stock markets were open on a Saturday was on May 18 when both the BSE and the NSE conducted a special session to test their disaster recovery mechanisms. Prior to that, both these stock exchanges remained open for a similar purpose on March 2.

Will the stock market fall after the exit poll outcome on June 01?

Markets, analysts believe, are likely to remain volatile in the run-up to the exit polls. Sharp swings are also expected on Monday, June 03, when the markets open for trade after the exit polls are announced on Saturday, June 01.

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

Who will form the government after the Lok Sabha election outcome? Will the markets crash post the Lok Sabha election 2024 exit polls?

Or, do they believe that the Narendra Modi-led Bharatiya Janata Party (BJP) and its allies that are collectively known as the National Democratic Alliance (NDA) will form the next government?

The markets, analysts said, expect the NDA to form the next government, though the margin of victory in the Lok Sabha polls and the final seat tally in Lok Sabha elections 2024 for the NDA versus the I.N.D.I.A. alliance is still a subject of debate. What the markets are looking for is a stable government and policy continuity.

“Based on opinion polls, markets expect the NDA political alliance to secure a third term in office, with a high probability of the BJP maintaining its single-party majority. This anticipated political stability should ensure policy continuity, supporting market sentiment and India's valuation premium,” wrote Premal Kamdar of UBS Securities in a recent note.

On the flip side, any unexpected results, Kamdar said, could trigger knee-jerk reactions in stock markets in the near term, with equity valuations possibly testing pre-NDA levels. Significant weakness in the stocks, he said, could offer buy-on-dip opportunities for investors.

Historically, any market underperformance triggered by election results tends to reverse in the medium-to-long term, as markets and businesses adapt to new government policies.

“We expect the stock markets to open on June 03, discounting the exit poll outcome and suggest a cautious approach especially this week. Investors can sit on significant cash to be conservative and deploy it back post-election results. It is worth even paying a premium to buy the stocks, as we believe that the bull-run would continue after discounting the election results and seeing possibly any knee-jerk reactions,” said G Chokkalingam, founder and head of research at Equinomics Research. 

Key technical levels to track for the Nifty

On the daily chart, technical analysts said that the Nifty 50 index remains in a firm uptrend. The Nifty 50, they said, continues to hold above the 20 and the 50 day simple moving average (SMA). The 14-day RSI at 66.63 is rising and not overbought, which is encouraging. 

"While we expect further upsides and new highs in the coming sessions in the run up to the election results, we remain open to volatile movements in the very near-term. Crucial supports to watch the Nifty 50 at 22,908-22,871," said Subash Gangadharan, senior technical / derivative analyst at HDFC Securities.