Maharashtra Elections and Stock Market: Weak earnings, strong dollar, FPI outflows and geopolitical events remain concerns, experts say; The stock market is now expected to get a boost on the back of a strong government in India’s largest financial hub.
Maharashtra Elections and BSE Sensex-NSE Nifty Outlook: Despite the landslide victory of the BJP-led Mahayuti alliance in the Maharashtra Assembly Elections 2024 in the state, all eyes are now on the Indian stock market, which has been battling bearish sentiment for over two months. Experts say the stock market is now expected to get a boost on the back of a strong government in India’s biggest financial hub. However, they said weak earnings, strong dollar, FPI outflows and geopolitical events remain concerns.
“The market is likely to witness a strong opening on Monday, with indices expected to rise 1 percent-1.5 percent,” said Deepak Jasani, head of retail research at HDFC Securities. A phase of recovery, and this will further boost the victory sentiment.
The BJP-led coalition, which also includes Chief Minister Eknath Shinde’s Shiv Sena and Deputy Chief Minister Ajit Pawar’s NCP, retained power in the state by winning 230 of the 288 assembly seats on Saturday. BJP got 132 seats, Shiv Sena 57 seats and NCP 41 seats. In MVA, Nationalist Congress Party (Sharad Chandra Pawar) candidates won 10 seats, Congress won 16 seats, while Shiv Sena (Uddhav Balasaheb Thackeray) won 20 seats.
Jasani said the NSE Nifty could target 24,400-24,500 levels in the first two trading sessions of this week.
Palka Arora Chopra, director, Master Capital Services Ltd, said, “Maharashtra result will provide political stability, positively affecting investor sentiment especially in infrastructure, urban development and manufacturing sectors linked to BJP’s policies.”
Chopra added that the stability in Maharashtra could trigger a rally in the stock market, which could boost investor confidence due to the continuation of pro-business policies, especially after the uncertainty following the previous coalition shift. Further, with a clear mandate, the government is likely to push infrastructure projects, a key focus of the BJP, which will benefit the construction, real estate and allied sectors.
On Friday, November 22, the stock market saw a sharp rally amid short covering in the F&O segment in the wake of a huge exit poll that signaled a big win for the BJP-led coalition. Although most exit polls were released at the end of the polling day on November 20, the most crucial polls like AxisMyIndia and Chanakya (which the markets followed closely) were released a day later on November 21 after market hours.
On Friday, November 22, NSE Nifty closed up 2.39 percent at 23,907.35, BSE Sensex rose 2.54 percent at 79,117.11.
Market Outlook: Technical Analysis
“The Nifty 50 ended the week with a positive candle on the weekly chart, recovering after eight weeks of selling. There is a recovery from the 200-day EMA, which closed above 24,900,” Chopra said.
On the outlook, Chopra said there is strong resistance at 24,100, which is an important level to watch. If buying pushes the momentum index above this, it may move towards 24,500. On the downside, 23,700 acts as a crucial support and a break below this could drag the index to 23,400.
“Until Nifty sustains above 24,500, the prevailing bearish trend suggests a ‘sell on rise’ strategy for traders, focusing on resistance and support zones for positioning,” she said.
Santosh Meena, head of research at Swastik Investsmart Ltd said, “The Nifty found strong support at 23,200, a 61.8 per cent retracement of its previous rally from the election day low of 21,281 to the high of 26,277. The index reclaimed its 200-DMA with a bullish bearish candlestick formation, signaling a possible trend reversal.”
Immediate resistance is at 20-DMA of 24,030 and breakout above this level will push Nifty towards 24,550/25000 levels. On the downside, 23,500 remains a critical support level, near the 200-DMA. Similarly, Bank Nifty held steady at its 200-DMA with immediate resistance at 51,300–52,000 and higher resistance zone at 52,600–53,300, she said.
“Historically, downtrends often culminate in days of panic, and the sell-off initiated by Adani marks such a turning point. As the markets were oversold for almost two series, a short-covering rally has emerged before the end of November,” added Meena.
Risks: ‘Geopolitics, Rupee Depreciation, Earnings Remain Worried’
“On the domestic front, the elections in Maharashtra where the NDA witnessed a lopsided victory is likely to further fuel the bullish sentiment. However, global factors pose significant risks. Rising tensions between Russia and Ukraine, coupled with rising crude oil prices, have added to inflationary concerns,” said Meena of Swastik Investsmart.
At the same time, a strengthening dollar index and elevated US bond yields weighed on the rupee, leading to a combined foreign portfolio investor (FPI) outflow of Rs 1.55 lakh crore in October and November.
“The direction of FPI flows will be a key determinant for the market following the recent correction,” Meena added.
Additionally, interest in Chinese markets is waning, making Indian valuations more attractive after the correction. Global triggers, including US economic data such as PCE inflation, GDP growth rate and FOMC meeting minutes, will play an important role in shaping investor sentiment. Commodities and geopolitical developments will also be important factors influencing global market trends.