There was a stupendous growth in market today with both BSE and NSE growing by more than 17% in two short trading periods. The poll results that came in on Saturday (16th May) falsified the exit polls prediction and confirmed a stable government. The current ruling alliance is now set to continue its show at centre for another five years.
The investor was buoyed by this news and invested heavily in everything that was reachable. The result was that most of the heavy weights saw margins of around 15 percent. Reliance industries had a whooping 21.73% rise in its fortunes. Other 20 plus percent gainers include Unitech, Bharati Airtel, State Bank of India, ICICI Bank, Larsen and Tubro, HDFC, Steel Authority of India LTD, Reliance Communications, DLF, Sun Pharma, Hero Honda, Reliance Capitals and Suzlon Energy.
Talking personally, when I wanted to sell of my holdings I found out that the market had closed for the day. Trading was allowed for a short while twice today. My holdings in Unitech are lucrative enough to sell of and book profits. I am looking forward to do so tomorrow. Today the trading graph was somewhat weird. I have attached a screen shot.
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We shall be discussing today what will be the state of share market after the current parliament election results are out. Will there be a bear effect of a bull effect? We have done well considering the economic slowdown. How will the election and the new government help in this run?
The reports say historically the markets have crashed after polls if the public mandate is not clear. Now that it seems we are to see a severely fractured mandate we can expect a fall in share market in 15 days. But there is one thing that may make things different this time. Actually we are almost sure that we are going to witness a hung parliament. So the results may not come as a shock so the effect would not be drastic either. It could be less pronounced.
Now you may be wondering, why a hung parliament would bring down the share market? A hung parliament or a fractured mandate is actually a state when no political party or coalition has full majority to make form the government. It shows the making of an unstable government. An unstable government will not be as effective in taking strong economic decisions or other decisions of national importance. Investors then feel insecure about their investments in this particular country. This leads to a huge withdrawal of FDI which eventually brings down the market.
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