Elections Over, Now what??

We have had a great pre election rally of about 50% on Nifty. Now, after the elections result has surprised everyone on the positive side, what is in store next? We are not going down fast, that’s for sure. But are we going to go up? Let’s analyze the situation given the liquidity situation.

First, the FII’s, DII’s and the HNI’s. A lot of funds got deployed in the April and May series. However, given the uncertainty that was there in this election, some of the funds must be on the sidelines waiting for a positive result. Now these entire funds will get deployed in a hurry. This will ensure that we have an immediate rally on our hands. Some of the funds would still prefer to wait and let the new Government make some announcements regarding reforms etc. This tells us that this rally will sustain for some time/ consolidate at least in the near term.

Also, do remember that speculative shorters will also be covering in panic on Monday/ Tuesday and there will not be people who will think about shorting this market now, at least for next 10-15% of uprise. Hence a quick rally is on the cards.

Having said that, we all have to remember that the situation economic wise has not changed with this event. If at all there was a uncertainty regarding this election, that did not show up in the form a correction that should have happened. This tells us that the market has been moving more in line with the global markets than on local cues. Hence, once the euphoria dies down after 3-4 days, global markets will have to support our markets if this rally is to continue.