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Last updated:Nov 24, 2024 4:31 PM IST

Maharashtra Elections and Stock Market: Experts say weak earnings, strong dollar, FPI outflows and geopolitical events still remain a concern; The stock market is now expected to get a boost thanks to a strong government in India’s largest financial center.

The election results in Maharashtra are expected to bring political stability and have a positive impact on investor sentiment, especially in infrastructure, urban development and manufacturing, an analyst says.

Maharashtra elections s and the BSE Sensex-NSE Nifty Outlook: Even if the Maharashtra Assembly Election 2024 has delivered a resounding victory for the BJP-led Mahayuti Alliance in the state, all eyes are now on the Indian stock marketwhich has been struggling with bearish sentiments for more than two months. Experts say the stock market is now expected to get a boost thanks to a strong government in India’s largest financial centre. However, they said weak earnings, a strong dollar, FPI outflows and geopolitical events still remain a concern.

“On Monday, the market is likely to witness a strong opening with indices expected to rise by 1 to 1.5 per cent,” said Deepak Jasani, head of retail research at HDFC Securities. recovery phase, and this win will further boost sentiment.

The BJP-led Mahayuti, which also includes Chief Minister Eknath Shinde’s Shiv Sena and deputy CM Ajit Pawar’s NCP, retained power in the state on Saturday by bagging 230 of the 288 seats in Parliament. The BJP won 132 seats, the Shiv Sena won 57, while the NCP got 41 seats. In the MVA, Nationalist Congress Party (Sharadchandra Pawar) candidates won 10 seats, Congress 16, while Shiv Sena (Uddhav Balasaheb Thackeray) won 20 seats.

Jasani said the NSE Nifty could target the 24,400-24,500 levels in the first few trading sessions this week.

“Maharashtra’s outcome is expected to bring political stability and positively impact investor sentiment, especially in infrastructure, urban development and manufacturing sectors aligned with BJP policies,” said Palka Arora Chopra, director of Master Capital Services Ltd.

Chopra added that the stability in Maharashtra could trigger a rally in the stock market, boosting investor confidence on the back of continuity of pro-business policies, especially after the uncertainty following previous coalition changes. Moreover, with a clear mandate, the government is likely to move forward with infrastructure projects, a key focus of the BJP, which would benefit the construction, real estate and allied sectors.

On Friday, November 22, the stock market saw a sharp rise amid short covering in the F&O segment, after major exit polls indicated a big win for the BJP-led alliance. While most exit polls were released at the end of voting day on November 20, the most crucial ones, such as AxisMyIndia and Chanakya (which closely monitor the markets), were released a day later, on November 21, after trading hours.

On Friday, November 22, the NSE Nifty rose 2.39 percent to 23,907.35, while the BSE Sensex rose 2.54 percent to 79,117.11.

Market outlook: the technical analysis

“The Nifty 50 ended the week with a positive candle on the weekly chart and recovered after eight weeks of selling. The recovery came from the 200-day EMA, which closed above 24,900,” Chopra said.

On the outlook, Chopra said strong resistance is seen at 24,100, an important level to watch. If buying momentum pushes the index above that, it could rise towards 24,500. On the other hand, 23,700 acts as critical support, and a break below could drag the index towards 23,400.

“Till Nifty remains above 24,500, the prevailing bearish trend indicates a ‘sell on rise’ strategy for traders, focusing on resistance and support zones for positioning,” she said.

Santosh Meena, head of research at Swastika Investmart Ltd, said: “The Nifty found strong support at 23,200, matching the 61.8 per cent retracement of its previous rally from election day low of 21,281 to high of 26,277. The index has reclaimed its 200-DMA with a bullish harami candlestick formation, signaling a potential trend reversal.”

Immediate resistance is at the 20-DMA of 24,030, and a breakout above this level could push Nifty towards 24,550/25,000 levels. On the downside, 23,500, close to the 200-DMA, remains a crucial support level. Similarly, Bank Nifty has held firm at the 200-DMA, with immediate resistance at 51,300-52,000 and a higher resistance zone at 52,600-53,300, she said.

“Historically, downtrends often culminate in panic days, and the Adani-induced selloff appears to have marked one such turning point. With the markets already almost two series oversold, there has been a rally in short covering ahead of the November expiry,” Meena added.

Risks: ‘Geopolitics, rupee decline, earnings remain concerns’

“On the domestic front, the elections in Maharashtra, where the NDA witnessed a one-sided victory, are likely to further strengthen bullish sentiment. However, global factors continue to pose significant risks. Escalating tensions between Russia and Ukraine, along with rising crude oil prices, have heightened inflation concerns,” said Meena of Swastika Investmart.

At the same time, a stronger dollar index and higher US bond yields are weighing on the rupee, collectively leading to record foreign portfolio investor (FPI) outflows of Rs 1.55 lakh crore in October and November.

“The direction of FPI flows will remain a key determinant for the markets after the recent correction,” Meena added.

Moreover, interest in Chinese markets is waning, making Indian valuations more attractive post-correction. Global triggers, including US economic data such as PCE inflation, GDP growth rates and FOMC meeting minutes, will play a crucial role in shaping investor sentiment. Commodities and geopolitical developments will also remain crucial factors influencing global market trends.