INSUBCONTINENT EXCLUSIVE:
NEW DELHI: Less than 20 per cent of Nifty500 stocks are today trading below their 200-day moving averages
The market breadth suggests extreme bearishness
Is there too much of pessimism at play in the market
Given that the coming year is going to be the election year, volatility is a given
the market, especially after the dust has settled post poll outcome
This was proven in last three elections
Cyclicals and select defensive plays were the leaders in all those years, giving returns in excess of 20 per cent.
Will 2019 exhibit a
last three election years, Nifty50 as well as the broader Nifty500 generated returns in excess of 11 per cent and 18 per cent, respectively
had any impact, either on stock performance or on economic growth.
Brokerage Elara Capital says despite an extremely weak coalition in the
2004 Lok Sabha, Nifty actually jumped 114 per cent during 2004-09
2004 Lok Sabha election, the Indian economy grew at a five-year average (2004-09) of 8.7 per cent
Hence in the worst-case scenario, even if the BJP forms government with outside support (Biju Janta Dal, AIADMK, DMK, NCP), it may not have
constituents have bullish overtone, as suggested by technical charts.
The low percentage (below 20 per cent) of stocks above 200-DMAs has in
the past coincided with market bottoms, be it 2004, 2008 or 2014
This year as well, the indicator is hovering around the oversold territory ahead of the general election.
In addition, net advance-decline
ratio at minus 400 (for Nifty500) signifies that market sentiment is at its bearish extreme, which offers favourable entry points, ICICI
Securities said.
History suggests cyclicals such as auto and auto components, banking and financials, capital goods, cement and construction
stocks have done well in an election year (post the outcome), as have shares of defensive plays such as consumer discretionary and IT
Axis Bank, Britannia Industries, Voltas, Abbott India, TVS Motor, JSW Energy and Aditya Birla Fashion are some of the top picks of ICICI
Securities for this election years
