UP election results Impact on markets: At a time when crude oil is at a multi-year high, the state elections in Uttar Pradesh could add short-term volatility to D-Street. Uttar Pradesh’s election results will be announced today, March 10, which could act as an important short-term sentiment for the market investors as it would reflect the public sentiment of the largest political state towards the ruling party, both at the center and in the stands.
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Roop Bhootra – CEO, Investment Services, Anand Rathi Shares and Stock Brokers, said: “Out of the five states, the markets mainly look at the UP results and how the incumbent government is performing in terms of seats won. Currently, the markets expect the incumbent government returns to power with a majority.”
More volatility on cards?
Narendra Solanki, Head of Equity Research (Fundamental), Anand Rathi Shares & Stock Brokers, said: “With the state election results announced tomorrow, markets are also likely to react to the outcome of the results and may see some volatility as the census progresses as the day goes on. Since UP is the most important of the five states, markets can monitor the outcome of the UP election and its impact on national discourse.”
What does a return of the incumbent government mean for the streets?
The two-day bull run that investors are currently cheering for could swing in both directions as a result of today’s UP election results. Nishit Master, Portfolio Manager, Axis Securities, said: “If the BJP does not come to power in UP, the markets assume that the Lok Sabha election results in 2024 could surprise and create uncertainty in the minds of investors. However, we think the response will be limited for a few days.”
However, if the incumbent government is unable to maintain power in the state, it could trigger a knee-jerk reaction from investors. Parth Nyati, founder of Tradingo, said: “If BJP doesn’t get into UP, we will see a reflex reaction in the market towards the 15,500 level, but after that the direction of the market will depend on the global situation.”
Market experts believe the market is currently more concerned about skyrocketing crude oil prices. Nyati stated that “the UP election is considered important from a market perspective, as it is an important state to determine the political situation and it could have caused a major turnaround in the market had it not been for a major global event.”
The greater impact of the election results will be seen in the form of an increase in fuel prices. So far, the government has kept fuel prices stable for more than four months ahead of parliamentary elections in five states, including Uttar Pradesh. Earlier there were reports that an imminent hike in petrol and diesel prices has been put on hold for greater clarity on global oil prices.
Meanwhile, the market is also concerned about the Fed’s policy meeting, which is scheduled for next week.
This is reflected in India’s VIX, a measure of the market’s expectation of short-term volatility, which has been in the 29-30 range for the past week. In mid-February the index stood at 20.6 and at the beginning of the year at 16.45.
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