Lok Sabha chunav result impact: Mid caps to banks, check out top 5 Dalal Street expectations from election results 2019

Lok Sabha chunav result impact: World's largest democracy will be eyeing the results of Lok Sabha Elections 2019 today, especially market participants. Over a billion people in India will be glued to all kinds of media platforms to find out who is winning. While the exit polls have given a win to NDA, the actual results will make it clear the exact strength of the upcoming government. Average of exit polls gave 304 seats to NDA and 118 seats to UPA with rest of the seats going to other parties outside of these two pre-poll alliances. BJP is predicted to win an average of 260 seats while Congress is expected to reach 67 seats in 2019. 

Vivek Ranjan Misra, Fundamental Research, Karvy believes, if NDA fails to cross the halfway mark, or an unstable coalition assumes power, markets could decline, on the contrary, if a single party were to cross the halfway mark on its own, there could be a significant rally in markets. A note of caution- results will take longer to trickle in.

Here are top 5 expectations that market is eyeing after tomorrow's results:

1. Small rally:  

The outcome of the exit polls led to a a sharp rally in markets this week, with Monday witnessing the highest single day gain over the past 10 years. The benchmark indices are expected to hit record highs on bullish investor sentiments ahead of the election results. 

''The market has priced in a return of the NDA with a full majority. If this does turn out to be the case, we are expecting a small rally in markets,'' Misra added. 

2. Interest rate sensitive sectors to do well: 

Notably, stability in government leads to better performances by sectors like banking, insurance, NBFCs, Auto and other impactful industries. The sectors which have worked well in last few years are seeking policy assistance from Centre and are expected to behave in a positive way if NDA retains power. ''We expect interest rate sensitive sectors Banks, Capital Goods and Autos to perform well, ''added Misra. 

3. No rooms for re-rating: 

Gautam Duggad, Head of Research, Motilal Oswal Financial Services said, ''We however, do not see a room for significant re-rating for markets given the underlying fair valuations (19x FY20 Nifty EPS) and continued earnings downgrades. Assuming, no material change in actual results vs. the exit poll predictions, we expect the market’s focus to revert to fundamentals post the election and government formation. Progress of monsoon, trends in rural consumption and events in debt market will be key near-term monitorables, in our view.''

4. Positive for bond and currency markets:

''We expect the markets to react positively to the exit polls. We also expect favourable reaction in the Bond and currency markets. Prediction of continuance of stable government with majority/near majority augurs well from reforms and policy agenda perspective,'' explained Duggad. 

5. Positive for mid caps:

S&P BSE Midcap index closed at 14,571 on Wednesday, 22 May. Also the corporate result season has remained flat and some of the mid cap companies have posted poor quarter results, but keeping general election results in mind, mid cap shares are expected to perform well after results announcement if NDA returns to power. Misra said, ''We are expecting mid caps to do well after results.''