The Indian equity market may see a 10% pre-election rally in anticipation of a stable and majority government, according to Morgan Stanley.
The market will follow its familiar pattern of pricing the results that favours continuity in government with a majority, Morgan Stanley said in Sept. 3 note.
The market, however, could experience significant fluctuations post-election, according to Morgan Stanley. These swings could range from a potential increase of up to 5% to a substantial decline of as much as 40%, depending on results, it said.
“The wild swing has historical precedent, although we think it could be more acute this time around,” it said. “For example, in 2004, when the election results were against what the market was pricing in, the Sensex fell 17% in a single trading session.”
Voting in the world’s biggest democracy with one billion voters will likely commence in April, with results likely in late May.
Source: bqprime.com
