The exit polls released over the weekend demonstrated that not much has changed on the ground, and the pre-election surveys were fairly similar to what is now being predicted in the exit polls.
Continuity of governments is always looked at positively, and the rally in equities this morning is probably reflective of that. While the actual results will only be known tomorrow, the consistency of all exit polls in demonstrating a largely similar outcome has made investors more comfortable with the assumption that the NDA will continue with a comfortable majority, and only the exact numbers of seats to be won are now in question.
Whilst it is very tempting to get elated with the stock market up-move , we need to keep in mind a few things:
- Exit polls are exit polls, and may not always be representative of the actual outcome. Be mindful of the same.
- Equity markets continue to be overvalued, and even more the mid and small caps. Do not forget this reality.
- Financial goals that you and your family have are unlikely to change due to this election outcome – one way or the other. We therefore need to be focussed on these financial goals and use equities only for longer term goals.
- Most sectors are rather expensive, and spaces like capital goods, infrastructure, defence, and PSUs that are influenced by government policy particularly so. Whilst they may go up in the euphoria, be mindful of their need to deliver earnings growth to justify their current stock prices, which are already stretched.
- Like we mentioned in our earlier conversations and election related physical meetings/webinars with you, a continuing government will mean that your equity, gold, and fixed income strategy will largely need status quo and gradual investments through strategies like SIPs/STPs, with a marginal underweight position on equities in your overall portfolio, maybe a good strategy for now.
As I had read somewhere – “We start by setting the course, we succeed by staying the course.”
Stay the course should be your strategy for now.
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Well written
Thanks Dr. Zubin for the encouraging comment