Bihar polls to engulf Samvat 2072

The stock markets continued to drift down for the second consecutive week owing to concerns pertaining to issues like poor corporate earnings, possibility of a rate hike in December, by Federal Reserve, and, last but not the least, the Bihar poll outcome. The week under review, the Sensex fell 392 points to close at 26265, also down by about 1850 points from 28700 a year ago. Thus, the Vikram Samvat 2071 set to end this week, turned out to be a bearish year for the stock markets.

When Vikram Samvat commenced a year ago, the ebullient mood of the market based on major political change was still in place and therefore the uptrend that had been prevailing at the end of the preceding year continued to lift prices of equities up till about mid-Samvat. But from middle of the year, the markets turned bearish for multiple negative factors including the failure of the government in getting many crucial reforms bills cleared in the Parliament, due to lack of sufficient numbers.

A poor monsoon, unchecked inflation and consequent denial of a rate cut by RBI in early part of the second half of the year, a crash in Chinese stocks followed by multiple devaluation of Chinese currency, a weak Indian currency, poor working results as being churned out by many Indian corporate and firming up possibility of the Federal Reserve hiking interest rate before December-end, are the factors haunt the markets till the week ended on last Friday.

With the BJP loosing the Bihar polls would dampen the markets and analysts see a deep-down opening on Monday and further down in this week on Mahurat trading. However, a likely fall or crash would only be a brief and forgettable event because the markets have seemingly already factored in this possibility in prices.

Although, defeat of the BJP in Bihar is not expected to affect the stability of the Modi-led NDA government at centre, it is considered to be of utmost important from the view point of Modi's popularity and also his ability to get economic reforms and development agenda forward.

Meanwhile, the winter session of the parliament is scheduled to commence from third week of November. The united and adamant opposition is most likely to stall proceedings of the same the way they did in the earlier session. That will have also a negative impact on the markets.

The on-going fall season in the stock markets is thus expected to extend until interest rate is hiked in the US. But a likely delay in the rate hike would prove a golden opportunity for buying Indian equities for both the domestic investors and the FIIs.

A rate-hike in the US is already factored in prices as the FIIs have been consistently selling for the last three months solely on fears of a rate hike and when actual rate hike happens, they might start re-buying because prices of stocks would have gone further down by that time, and therefore, unaffordable for selling. For long-term investors, a golden opportunity for buying shares is thus awaiting.