Next couple of days will be dominated by the news of RBI and elections results, followed by focus on global setup, said Udayan Mukherjee
Udayan Mukherjee, Consulting Editor at CNBC-TV18 said the probability of BJP winning 2:1 (two states out of Madhya Pradesh, Rajasthan and Chhattisgarh) should not be a great thing to be taken by the market and should not be a comfort level.
Currently, BJP has 62 out of total 65 Lok Sabha seats from three states. If that count drops to around 35 then that will be taken badly by the market, he feels.
After considering the lead taken by Congress in four states — Madhya Pradesh, Rajasthan, Chhattisgarh and Telangana, Udayan said, "Not much can be done economically through policy tweaking as the central government has very less time before the 2019 elections. Even if the ruling party opens taps now, it will be time for Lok Sabha polls," Udayan Mukherjee said.
There are higher chances of lower growth in coming years which will be bigger worry for the market.
The government will try to revive growth, but is left with little time to focus on economic growth strategy.
So the government will do some engineering to get votes on back of socio-politics front, which might be only thing that might get them back in power in 2019, which is unfortunate path but there is no option with the government now.
He feels 10,000 on Nifty is not safe right now as lot of things are changing on ground.
The extent of US and global slowdown, if it happens, then it is going to be important factor to determine return factor for India.
We are basically wading through tepid environment, unexciting stock market scenario, so no new highs likely in the coming year but considering lukewarm expectations on growth, there are fair chance of new lows and 10,000 could be broken.
With respect to RBI, the price action in currency as well as equity market will be taken with a pinch of salt by the government as they will try to protect both markets, he said, adding the day will be managed by the government.
He added "Who the RBI governor is not important, but the resignation would be perceived as important by the world. He sees ramifications in the medium term."
Next couple of days will be dominated by the news of RBI and elections results, followed by focus on global setup.
Fair amount of short covering after gap-down opening on December 11 indicated that bears will be taking profits off the table after crash seen from last week.
The Sensex fell nearly 1,300 points from last week and on December 11, it fell another nearly 500 points in early trade.
Few days back, the Indian rupee was at 69.50 to the dollar and now it is around 72.30 a dollar, so people will prefer to trade in IT and pharma stocks (barring Sun Pharma). They will definitely avoid trading in financials which is the crucial sector and driver for the market and commodities which are volatile on global setup.
The day might start somewhere else and end somewhere else, which we can't predict, but the next few days will be important.
Look at the day of Union Budget, when the government introduced long term capital gains, the Sensex ended flat but next day it fell 500 points.
So, it is always better to watch market reaction over next few days.
In the longer term, earnings and economy growth will play in the minds of investors. So one should not give much importance to politics as national parties, whichever comes in power, will more or less have same policies.
Whether it is coalition or single party government, the stability is important, but what actually matters to the market is growth and earnings.
What is a bigger worry for me is that many global investors are talking about sub-7 percent growth in India in coming quarters. So one should not be worried so much about politics.
There is no doubt that India will be fastest growing economy in the world. But if India grows at around 6.5 percent in coming years then that will be taken badly by the market and it will go down.
So, it is not about GDP and fastest growing economy, in fact both macro and micro will be looked at by investors and that is painting a good picture.
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