Markets have closed the April series on lifetime high. The May series promises to be a cliff hanger as market participants eagerly await the outcome of the blockbuster election thriller. While the markets have almost fully discounted the 'Namo' factor and are heavily backing a BJP led NDA Govt. at Delhi after May 16, the 'El Nino' factor is yet to be analysed by the markets. I shall briefly discuss these issues in this post, and its consequent effect on market behaviour during FY 2014-15.
While it is given that BJP is going to emerge as the single largest party, but its overall performance needs to be judged through Astro-analysis. It is very difficult to gauge the public mood in a long drawn election spread over 36 days from April 7 - May 12, 2014, and as such opinion polls may not be able to give a clear picture of the poll outcome. In such a scenario Astro-analysis plays an important role. For BJP the election schedule is characterised by three distinct phases: Phase I which lasted up to April 15, was distinctly marred by infighting within the party. Phase II started from April 16 and is currently in operation, is the favourable phase of the Sun for the party and has led to the so-called 'Modi wave' which can last up to May 6. Phase III starting from May 6-7, may bring some unpleasant surprises for the party and may pose some hurdles to its supremacy. Varanasi has become the pivot of this election campaign and will decide the fate of General election 2014. 'Namo' had the option of taking a direct flight from Gandhinagar to New Delhi, but Amit Shah acting as 'ATC' for the BJP has diverted the flight via Varanasi, not-withstanding the turbulence in the skies of Varanasi. The final decision now rests with 'Har Har Mahadev' the Lord of Varanasi.
Now coming to the 'El Nino' factor. The most commonly accepted definition of an El Niño is a persistent warming of the so-called “Niño3.4” region of the tropical Pacific Ocean south of Hawaii, lasting for at least five consecutive three-month seasons leading to reversal in the direction of the Pacific trade winds. The brunt of the El Nino effect is faced by Asia due to weakening of the South west monsoon in the region. The chances of an El Nino occurrence during 2014 is predicted to be as high as 70%. Failure of monsoon may lead to a higher inflation rate in India leading to a hike in interest rates by RBI. This is likely to delay the economic recovery by at least 6 months. RBI Governor has already sounded the warning bell when he said: “There are risks to the central forecast of 8% CPI (consumer price index) inflation by January 2015 stemming from less-than-normal monsoon due to possible El Nino effects.”
What should the investors do in such a scenario? Good times have returned to our markets after a long wait, so investors should make merry while the party lasts, but should be prepared to quit before the 'Hangover'. The markets are likely to peak out before the first week of May, and even if a strong BJP led NDA Govt. is installed after 16th May, the upside potential will be restricted to 3-4%, whereas the El Nino poses at least a 15% downside risk to the markets. In the final analysis it boils down to the fact that around 7000 levels on Nifty is a good inflexion point to book substantial profits: whether you would like to take a call before May 16 or thereafter is your choice!
What should the investors do in such a scenario? Good times have returned to our markets after a long wait, so investors should make merry while the party lasts, but should be prepared to quit before the 'Hangover'. The markets are likely to peak out before the first week of May, and even if a strong BJP led NDA Govt. is installed after 16th May, the upside potential will be restricted to 3-4%, whereas the El Nino poses at least a 15% downside risk to the markets. In the final analysis it boils down to the fact that around 7000 levels on Nifty is a good inflexion point to book substantial profits: whether you would like to take a call before May 16 or thereafter is your choice!
