INSUBCONTINENT EXCLUSIVE:
All equity strategists seem to agree that the big focus for investors now is next year's election.The morning after the day before and
equity strategists remain split on whether the world-beating rally in domestic stocks will continue or pause for breath after Wednesday's
rate hike.All seem to agree that the big focus for investors now is next year's election."Investors will forget the rate hike and refocus on
individual companies and their outlook," said Kishor Ostwal, managing director at CNI Research Ltd
"The fate of general elections next year will be the focus of attention."Domestic stocks will surge to a new high as most investors are
short and this quarters' earnings are better than expected on aggregate, according to Ostwal.The central bank raised interest rates to the
highest in two years to tackle inflation pressures in the world's fastest-growing major economy and shore up the rupee if a global currency
Reserve Bank of India Governor Urjit Patel hinted at possibly more tightening to maintain economic stability amid growing risks from global
trade and currency tensions.(SP BSE Sensex Index slipped 0.2 per cent Wednesday after the rate hike.) The benchmark SP BSE Sensex Index
slipped 0.2 per cent Wednesday after the hike
Still, the gauge has advanced 10 per cent this year, holding its place as Asia Pacific's best performing market and becoming the world's
best major stock market in local currency terms.While Abhimanyu Sofat, vice president at India Infoline Ltd
also sees further gains, he expects a "churning" in terms of market leadership
A selection of banks and industrial stocks, such as Reliance Industries Ltd., is likely to lead to new highs, he said."Investors are likely
to forget this hike soon as earnings growth is improving led not only by consumer but now industrials as well," he said.Still, other market
participants suggest the rally is now due for a pause, with extended valuations causing investors to become more cautious
And coming back on to the investment radar is politics."We may see some consolidation coming in as we are getting closer to an election
cycle," said Soumen Chatterjee, head of research at Guiness Securities Ltd
"Markets can take this policy decision as non-event."The federal election due by next year will determine whether Prime Minister Narendra
Modi extends business-friendly policies he put in place after the 2014 vote, when his party won the largest majority in three decades
While economic growth initially surged after his victory, it took a hit after he banned 86 per cent of the country's currency in a bid to
stamp out unaccounted wealth in 2016, and has only recently recovered.With his popularity receding, polls show that PM Modi's ruling
Bharatiya Janata Party may fall short of a full majority."Elections brings uncertainty and that is something which markets generally don't
like," said Guiness's Chatterjee.
