Elections, whether they are state or general, are known to cause a spike in market volatility as investors prepare for possible changes in legislation. Thursday’s trading day served as a concrete example of how the 2024 Maharashtra Assembly elections would only have a temporary effect on Indian financial markets. The market may stay in negative territory due to the following factors: the U.S. dollar reached a 13-month high amid likely of aggressive rate cuts by the U.S. Federal Reserve in December; persistent foreign outflows; global geopolitical concerns; constant FII selling; and uncertainty surrounding the outcome of state assembly elections in Maharashtra and Jharkhand. However, election seasons are historically characterised by higher levels of volatility, thus market observers will look for the most promising stocks or sectors to wager on in this situation. Global geopolitical concerns, persistent FII selling, uncertainty surrounding the results of state assembly elections in Maharashtra and Jharkhand, and ongoing foreign outflows could keep the market in negative territory.

Top Maharashtra Sectors To Watch

As we know, whether it is General or state elections, they often bring a surge in market volatility as investors anticipate potential policy shifts. Sectors like sugar and automobiles, which tend to benefit from government-backed initiatives, could see more activity, while FMCG and fertilizers, reliant on rural demand, might feel the impact of changes in agrarian policies or farmer welfare measures. I feel these elections highlight just how closely political developments and market movements are tied together, said Trivesh D, COO, Tradejini.

Infrastructure Push? Maharashtra Election’s Potential Impact on Cement and Construction Stocks

Elections in Maharashtra could have a strong bearing on cement and construction stocks in India, as the state is critical for infrastructure development – most of which is pending. With the coastal road and metro parts expansions under Mumbai, the outcome of elections could help push these projects forward or delay them. The construction industry in the state currently provides over four million jobs and accounts for about 15 percent of the Maharashtra state’s GDP, as per Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited.

“According to historical patterns, election cycles are marked by increased volatility however, the infrastructure stocks in focus seem to have more activity. However, with a Rs 6.5 trillion infrastructure pipeline in Maharashtra, the proposed plans could change the paradigm concepts most companies are used to. Companies like Ultratech Cement that have a strong foothold in western India markets and construction giants like L&T could both benefit from steady or changing policies,” Siddharth Maurya added.

The focus on affordable housing, infrastructure development, and urban rehabilitation projects stated in the election manifesto is more likely to lead to increased demand for construction materials. Cement demand which is currently at 8-9 per cent growth is expected to further increase and reach higher levels, stated Siddharth Maurya.

Analysts highlight that such investors must be on the lookout for when policies and their related actions are settled post-election and any change to regulations with respect to costs of raw materials or environmental management requirements before committing to any investments in this sector.

Market Outlook Today

Technically, Nifty index on a daily scale has formed a red candle, indicating weakness. However, the index has respected the 50-Weekly simple moving average (WSMA), which is placed near 23,300 and short term trend line support which is placed near 23,200. As long as index holds 23,200, short term relief rally could be possible. Overall, the short-term trend will remain down till index remains below 23,800, said Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates Ltd. (A Pantomath Group Company).

“Technically, Bank Nifty index on a daily scale has found support near 200-Days simple moving average (DSMA) and formed a hammer candlestick pattern, indicating strength. According to the hammer candle, if the index sustains above today’s high of 50,652, a pullback to the 51,000-51,500 levels is possible. On the downside, 200-DSMA is placed near 49,820 and low of hammer candle is placed near 49,787 levels, which will act as support points. If the index manages to respect the 49,787 mark, a relief rebound is likely in the index,” added Hrishikesh Yedve.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.

Story first published: Friday, November 22, 2024, 8:22 [IST]