2019 Lok Sabha polls to add volatility to stock market, says Morgan Stanley’s Ridham Desai
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Even as Sensex and Nifty continue to remain range-bound on the back of various domestic and international factors, Morgan Stanley’s Ridham Desai said that the 2019 Lok Sabha polls will add volatility to the domestic stock markets. “Elections are a binary thing. It’s very hard to judge ahead of time. It’s going to be a source of volatility. Had there elections not been around, we would’ve had a very strong 2019,” Ridham Desai, head of India equity research and India equity strategist said.
According to the expert, the key risk is that we get a minority government. “A minority government is not necessarily a risk to the economy, buyt poses a risk to stock prices. However, investors need to look beyond these events which generate volatility as equity is a long-term asset class. At these levels, markets are giving an opportunity for long-term investment,” he added.
According to Jason Monteiro, AVP- MF Research & Content at Prabhudas Lilladher, if the BJP Government is voted back to power, the Nifty 50 may touch the 12,500 level over the next 12 months. “A hung parliament, like that seen in 1996, could turn out disastrous for the markets, taking the Nifty 50 to the 9,000-9,500 levels,” he told FE Online.
In a recent interview, Desai said that the market has still not priced in the election’s outcome. “I feel it will start doing that in the first week of December…market participants believe the state elections results would give them some perspective about the general election results,” he said at an event to mark Morgan Stanley’s 25th anniversary in India. According to Ridham Desai, the upcoming state elections in December will be important to decide the market sentiment. “We will know what the market has started believing about 2019 (election outcome), whether it’s going to be a single-party government, or it’s going to be a coalition government…” Ridham Desai noted.
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