Reading the tea leaves: What to expect from markets if BJP falls short of majority?

As India nears June 4, the day of the Lok Sabha election results, the financial world is abuzz with speculation and anticipation. V.K. Vijayakumar, Chief Investment Strategist, Geojit Financial Services predictions are clear--the market would soon start its dance with sharp movements leading up to the crucial day. Before closing nearly 1,197 points up 75,418, the benchmark equity index BSE Sensex scaled its all-time high of 75,499.91 on May 23. The index traded almost flat at 75,408 in the afternoon trade on May 24.

“The rally in the domestic equity market is likely to begin before the results,” he said.

For investors eyeing potential winners if Prime Minister Narendra Modi retains power, Vijayakumar points towards sectors such as financials, automobiles, capital goods, real estate, and pharmaceuticals.

On the other hand, he added that if the BJP-NDA coalition falls short of the majority, the market will crash. “But that is a remote possibility,” he says.

In terms of investment strategy, Vijayakumar favours large-cap stocks over mid- and small-caps, which he considers to be overvalued. When asked about the debate between gold and equities, Vijayakumar hedged his bets, advocating for both but with a clear tilt towards equities, reflecting his confidence in the market’s potential.
 
Sharing his advice with new investors, the market watcher said that one should invest systematically through ups and downs. He advised investors to not speculate in the market and avoid futures and options (F&O).

Commenting on the PSU basket, which has outpaced the benchmark equity index BSE Sensex in the past one year, he said, “PSUs have staged a smart turnaround. Investors should remain invested. PSU banks are even now attractively valued. Defence PSUs are good for long term but valuations are high. ‘Buy the dip’ is the right strategy to accumulate defence PSUs. The BSE PSU index has rallied 105% in the past one year till May 23, while the 30-share Sensex gained 21% during the same period."