An over 3 percent gain in the Nifty 50 on Monday, June 3, following exit polls predicting a solid majority for the Narendra Modi-led NDA in the 2024 Lok Sabha election, could extend further if the election results on Tuesday align with market expectations. However, if the results fail to meet the expectations of D-Street, there may be some turbulence in the short term, according to experts.
Nifty 50 hit an all-time high of 23,338.70 but closed at 23,263.90, up 3.25 per cent, on Monday. Experts believe the index could rise to the level of 23,500 on Tuesday.
Experts believe some profit-booking may follow a market rally after the election results, as the market’s focus for the short term will shift to the government’s policy announcements in the first 100 days and the upcoming Budget.
All eyes are on the Lok Sabha election results on Tuesday, June 4. Elections serve as both short-term and long-term triggers for the stock market. In the short term, election-related speculations and outcomes influence market sentiment. In the long term, political stability, government policies, and measures significantly impact the stock market.
Also Read: Nifty to reach 24,500 by the end of this year: BofA Securities
We gathered expert opinions on how they expect the Nifty 50 to move on election result day. Will Nifty 50 break Monday’s record or remain in a range? Here’s what they said:
Shrikant Chouhan, Head -Equity Research, Kotak Securities
Chouhan believes that as long as the Nifty 50 trades above 23,000, the bullish momentum will likely continue.
“On the higher side, the index may rise to 23,500 or even 23,800 levels. On the other hand, below 23,000, the index might correct back to 22,800 levels. The strategy should be to take partial profit on long positions around 23,800 levels,” said Chouhan.
“The strategy for Tuesday should be to create ‘Bull Call Spread’. For that, buy 23,000 call options (6th June 2024) at 200, with a target of 500 and sell 23,800 call options at 60. The maximum loss would be 140 points. The risk-reward ratio would be 1:3,” said Chouhan.
Apurva Sheth, Head of Market Perspectives & Research, SAMCO Securities
Sheth believes that the Nifty 50 has the potential to touch 23,500 as the counting starts on Tuesday, June 4. However, he said traders must use this as an opportunity to book profits in their long positions and wait for the dips in Nifty around 23,000 to 22,800 levels to create fresh long positions. The medium-term target in Nifty is around 24,500.
“If the actual results of the Lok Sabha elections mirror the forecast of Saturday’s Exit Polls, we may see this euphoria sustaining. At the same time, we may see the euphoria gradually dying after the results are declared, as the phenomenon of ‘buy on rumours, sell on news’ may come into play,” said Sheth.
Rajesh Palviya, SVP – Technical and Derivatives Research, Axis Securities
Nifty 50 hit an all-time high and witnessed short covering; if election results align with exit polls, this rally will likely continue.
“We may see another round of short covering in Nifty, which can take it higher towards 23,700-23,800 levels. The market has shown a strong rally in the PSU basket, which indicates that the street is confident towards the clear victory of the NDA government,” Palviya said.
“We may witness high volatility during the day. We advise keeping a stop loss of 23,050 to hold long positions,” said Palviya.
Also Read: Markets at an all-time high but don’t get swayed by the euphoria: Enam’s Doshi
Mandar Bhojane, Equity Research Analyst, Choice Broking
Significant market volatility is expected as we anticipate the official election results on June 4.
“The Nifty index has established strong support between 22,600 and 22,800, potentially reaching 24,000 if it closes above 23,400. The RSI at 67 indicates strength, while open interest (OI) data shows resistance at 23,500 and 24,000 on the call side and support at 23,000 on the put side. For Bank Nifty, sustaining above 51,000 could push it to 52,000 and 52,700, with immediate support at 50,400 and 50,000,” said Bhojane.
“Traders and investors should employ robust risk management strategies, monitor key levels, and stay informed about real-time election updates. This approach will help navigate the expected volatility and capitalise on potential opportunities in the market,” Bhojane said.
Rupak De, Senior Technical Analyst, LKP Securities
“If the election results align with the exit poll or fall below the poll numbers, it might attract mild to heavy selling pressure in the overall market, including in the Nifty 50,” said De.
“However, if the results are better than expected—meaning if the NDA secures significantly more seats than the average exit poll numbers—then the Nifty might embrace another round of buoyant movement,” said De.
Ruchit Jain, Lead Research, 5paisa Capital
“If all goes well, we could see a continuation of the momentum on the higher side. The previous hurdle of 23,100-23,000 will be seen as immediate support now,” Jain said.
“On the higher side, retracements of previous moves hint at possible targets around 23,700, followed by 24,000-24,200. Hence, traders are advised to continue trading in the direction of the primary trend with a positive bias,” said Jain.
Anand James, Chief Market Strategist, Geojit Financial Services
James pointed out that India VIX has eased 14 per cent, suggesting that market expectation for downside surprise has eased. Historically, VIX collapses immediately after the maturity of the event. This suggests that call premia has limited room for upside, even if results best exit poll outcome in favour of the ruling party. However, given that VIX is yet to slip below 20, an expectation of an outlier is still very present.
“Our go-to strategy for such a scenario is an iron condor or iron butterfly option strategy, which bets on VIX’s collapse but also limits risk to account for wild scenarios,” said James.
Shrey Jain, Founder and CEO, SAS Online
“Today’s market mood heavily relies on the election outcome. If the results match the exit polls, indicating a significant win for the NDA, the Nifty could experience more positive activity. However, if the results fall short of the exit poll predictions, it could trigger selling pressure across the market, including the Nifty,” said Jain.
“Looking at yesterday’s market activity, it’s clear that bullish sentiment drives things, with buyers eagerly capitalising on even minor dips to make long-term investments. The Nifty has established a new base of 23,000, with support levels of 23,200 and 22,950-23,000. The Nifty faces immediate resistance at 23,350, potentially prompting some investors to take profits,” said Jain.
Atul Parakh, CEO of Bigul
According to Parakh, from a long-term perspective, the market’s trajectory hinges on a broader set of factors, such as structural economic reforms, implemented fiscal policies, global market trends, and corporate earnings growth. These fundamental drivers will continue influencing market performance significantly beyond the immediate election cycle.
“While short-term fluctuations are expected, we advise investors to maintain a cautious approach, prioritising in-depth fundamental analysis and strategic diversification to navigate potential turbulence and capture long-term opportunities,” said Parakh.
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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.
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