Post assembly election results, markets to shift focus to Covid and earnings
Premium- Markets are expected to be driven by the outlook on earnings, covid-19 vaccination and the trend in bond yields amid rising inflation expectations
Markets may stay volatile after assembly election result of four states and one union territory. Trends in the election results so far indicate Trinamool Congress (TMC) taking the lead while the Bharatiya Janata Party (BJP) have crossed the majority mark in Assam and Left Democratic Front (LDF) in Kerala.
While current assembly election account for 21% of India’s gross domestic product (GDP) with similar share in the number of seats in Parliament, it indicates electoral significance but analysts do not yet expect it to bring any major economic policy disruption. Among states, the most keenly watched elections was West Bengal. A win for the BJP for first time ever would further strengthen ruling party's presence in Eastern India.
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1 min read . 04:54 PM IST“We do not expect a negative reaction due to elections which were tad disappointing. We expect the gross services tax (GST) collections to have a positive rub off on the markets going forward," said Pankaj Pandey, Head of Research, ICICI Securities.
Central and state governments collected a record Rs1.41 trillion in goods and services tax (GST) in April, represent the tax collected towards transactions done in the month of March. Markets are expected to driven by the outlook on earnings, covid-19 vaccination and the trend in bond yields amid rising inflation expectations.
On Friday, Indian markets skid 2% after showing resilience last week even as covid cases continue to escalate amid uncertainties around vaccination while new states imposed lockdown-like curbs.
“The continuous spread of the pandemic was the key concern governing the market sentiment, the impact of the localised lockdowns to control the pandemic and its impact on the economic variables would be the significant market drivers over the near term. The market would also take cues from the on-going earnings results season, and the management commentaries on as to how do they visualize the current situation evolving over time," Joseph Thomas, Head of Research, Emkay Wealth Management said.
As various parameters suggest a second wave peak in Maharashtra anytime from now to the end of May, analysts at CLSA foresee chances of some relaxation of the current lockdown measures sometime around mid-May and mid-Jun 2021. “These parallels from other countries indicate the market may start seeing some positive signs on the Covid-19 front in the coming weeks. This, along with a pick-up in vaccinations and not so bad management commentary during the ongoing results season may allay the worst fears for investors regarding the impact from a second wave of the virus," Vikash Kumar Jain, analyst, CLSA said in a note on 28 April.
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