After steep fall of around 1800 points Sensex rallied close to 750 points in last 2 days before the Exit poll suggest even bears had to fear of keeping shorts open as chances BJP doing 280 is not ruled out and if that happens there will be repeat of 2009.
Fpi,yes , were in selling mood in the month of May though aggregate is selling in May is not more than Rs 2000 crs which can be considered as reversal of FPI stance. Having invested around rs 70000 crs in just 3 months selling of just Rs 2000 crs does not indicate reversal of trend. This selling could be part of nervousness to some extent, could be to keep market controlled for more buying ( will deal little later ) and finally could be some unwinding due to MSCI reduction in INDIA weightage.
If you study closely the pattern of operations whether it is FPI or as the case may be, Indian operators, during accumulation this is a common strategy. That is, after good buying, keep on selling in small bouts which will create enough confusion among brokers and investors. Brokers always get governed by flows and once buying flow stops start generating sell calls. Investors too follow that and when instead of buying see FPI selling they become aggressive short sellers. This is what picked up by FPI as a strategy. In our mind , we are very clear that they will never infuse 70000 odd crs that too in 3 months if they feel this is a market to invest. This also means after the small pause they will drive harsher after 23rd May 2019 and that is why they have done some selling so that bears sell it more. That is what happened. Their small selling of Rs 2000 crs triggered bear attack which brought down markets by 1800 points.
Weak bears, though, never wanted to keep the positions fully exposed decided to cut it short to some extent which resulted in rally of 750 points.
Now to extend the same analogy on 23rd May and see what will happen on election results. If bjp 220 then bears will attack again and Sensex will be down 1000 points in no time. If bjp 280 then Sensex will be up 1000 pints then 2000 points in no time. If bjp 250 260, moves will be range bound as surety of formation of Govt will fuse the tension.
Now what will be Exit poll on 19th ...?
We believe no Exit poll will show 280 for bjp. At the same time, we are very sure some exit polls will be at 210 also. Range could be 210 to 255. Exit polls failed in 2004, 2009, 2014 and now even in 2019.
Reason for failures could be small sample size, pre determined bias, lack of depth analysis on ground level, ignoring key important factors determining trends. The factors which have silent killers and could work in favour of BJP are Muslim votes thanks to triple talaq and haj policy of bjp, balakot attack and military action, 10 pc reservation and huge rise in tax free income to the middle class. Gst and demo did hurt some class but that is high net worth individuals which is hardly 1 or 2 percentage of the population. 32pc of the INDIAN population is middle class and is pleased with the BJP action of raising tax free limit to Rs 5 lac directly and Rs 7.5 to 8 lacs indirectly.
India's largest opposition, we feel , played wrong cord on balakot and triple talaq. Military has 5 to 10 lac soldiers and 99.99 pc are from rural India where colonism works while taking voting decisions. The doubts raised and insult of military has not gone well with Congress with regard to Rural India which was their backyard. BJP was missing the link there and CONGRESS helped BJP to make huge stride forward in RURAL INDIA.
Similarly anti incumbency could have shown colours in 2017 itself in U P where bjp succeeded to get 325 seats thanks to triple talaq which has always triggered hidden votes. In 2 years you cannot expect major anti incumbency hence we will not see major loss of BJP in U P. SP BSP combine may not dent much vote share as projected by media. Even in 2017 SP CONGRESS combine had failed miserably. U P has major contribution to INDIAN MILITARY. Thus RURAL INDIA is a new game changer for NARENDRA MODI this time.
We have already given you the picture of Madhya Pradesh Rajasthan and west Bengal in our note and hence we clearly believe that BJP will get 273 on its own. Nifty has to travel towards 12300 and then 13000. Markets are oversold and a fraction short covering if can see rally of 750 points then full throng short covering, an anticipated buying of another Rs 70000 crs from Fpi and strong buying from DII coupled with re entry of retail investors after a gap of almost 15 months will take market easily past 13000. Earlier we had given valuation matrix which suggest INDIAN MARKETS are not expensive and fair valuation is NIFTY 14000.