The English translation of the
Hindi word “Dubara” is “again”. The first thing that comes in a Technical
Analyst’s mind when he thinks about the word “Dubara” is a stock market cycle.
A cycle is a chain of events that repeats over time. The outcome might not be
the same each time but the characteristics are quite similar.
Cycle frequencies can both be
short and long, it can last from minutes until thousands of years.
Understanding long term cycles in stock market helps you determine the overall
market trend and similarly short term cycles helps you determine your timing in
the entry and exit points in the stock market. Text Book examples of stock
market cycles widely respected and followed are “US Presidential Cycle” and
“Dow 18 Year cycle”
We are going through one such Short term cycle which is the “India’s Election Cycle”. As per this cycle, Nifty has the tendency to rally few weeks before major elections results are out and then post results it goes either for time wise consolidation or price wise consolidation for 12/13 weeks.
We are going through one such Short term cycle which is the “India’s Election Cycle”. As per this cycle, Nifty has the tendency to rally few weeks before major elections results are out and then post results it goes either for time wise consolidation or price wise consolidation for 12/13 weeks.
The last two major elections conducted by the election
commission were the 2013 Assembly elections conducted in November and December
2013 and the general elections conducted in April and May 2014. The results for
the same were announced on 28th Dec 2013 and 16th May 2014 respectively. The
Outcome for both the General and Assembly elections were big setback for the
Congress and a Victory for BJP. While the BJP retained Madhya Pradesh and
Chattisgarh, It snatched Rajasthan from Congress in the assembly contest. In
Delhi BJP was the single largest Party. In General elections, BJP won 282 seats
thus winning by a simple majority, a remarkable feat in an era dominated by
coalition politics. Congress just managed to win 44 seats.
In the Indian Political Space, Congress is seen as
“Centre-Left” and dominates this space whereas BJP dominates the “Centre-Right”
space. A centre-right party shows more
faith in markets, prefers small government, dislikes welfarism and is
comfortable with business. The Recent rally in the market is needless to say
propelled by the resurgent BJP.
If this is the case then why did we see the markets
topping out immediately on the day elections were announced?
This could be because of the Dow
Theory which is the Bible of Technical Analysis. As per this theory markets
discount everything. The basic premise of Dow Theory suggests that all
information - past, current and even future - is discounted into the markets
and reflected in the prices of stocks and indexes.
That information includes everything from the emotions of investors to inflation and
interest-rate data, along with pending earnings
announcements to be made by companies after the close. Based on
this tenet, the only information excluded is that which is knowledgeable, such as
a massive earthquake. But even then the risks of such an event are priced into
the market.
The Election commission is likely to
conduct polls in Maharashtra, Haryana and Jharkhand in October and the results
for the same would be announced in November. Although the exact dates of
Polling and then the announcement of results is yet to be announced, this could
be the most likely scenario considering the end of the tenure of current
assemblies in these states. The EC will also conduct elections in Jammu &
Kashmir which could happen just after the elections of the above states.
Alternatively it could also conduct elections along with Maharashtra, Haryana
and Jharkhand keeping in mind the security situation of the state. We believe
Nifty is likely to be driven next few weeks by the political commentary and news
arising from this states. In the top- down approach to investing in the stock
markets, politics tops the list and its importance cannot be understated. It is
in this backdrop that we thought it important to release a separate special
“Political Report” on the above subject...
MAHARASHTRA
~ The Maharashtra state assembly election, 2014 will be held in late 2014, to select the 288 members of the Maharashtra Legislative Assembly, which ends its term on 7 December 2014.
~ The Maharashtra state assembly election, 2014 will be held in late 2014, to select the 288 members of the Maharashtra Legislative Assembly, which ends its term on 7 December 2014.
~ The main
battle would be between UPA led by INC along with alliance partner NCP and NDA
led by BJP, SS, RPI (A) and other regional parties.
~ The current
government is led by Congress and NCP.
~ In the recently
conducted Lok Sabha elections, NDA won 42 out of the 48 Lok Sabha Seats which
is 87.5% of the seats. It was leading in more than 230 assembly segments. A Lok
Sabha constituency is divided into various Assembly constituencies. If
identical voting pattern takes place NDA would easily won more than 230 seats
in assembly.
~ Some of the
factors that is against the ruling Democratic front led by congress is 15 years
anti-incumbency, misgovernance, serious corruption allegations, farmer
suicides, arrogance of top leaders.
~ Factors
favoring NDA includes Direct Support, Indirect support, electoral alliance or tactical support by regional parties like MNS, Swabhimani Paksha, RSP and RPI (A).
Recent switch-over of major leaders from NCP-Congress to NDA folds. Association
of Voters with ruling party at the centre for benefits to the state. All this
factors were not with NDA in previous assembly elections conducted in 2009.
~ Based on
the above we believe Maharashtra would be an easy walkover for NDA and it could
win more than 200 seats.
HARYANA
~
The Haryana Legislative Assembly election, 2014 will be held in late
2014, to select the 90 members of the Haryana Legislative Assembly, which ends
its term on October 27, 2014.
~ It is
likely to be a Muti-party contest with Om Prakash Choutala Led “Indian National
Lok Dal”, INC led by Bhupinder Singh Hooda, BJP and Haryana Janhit Congress- BL.
BJP and Harayana Janhit Congress could tie-up. BJP-HJC had tied up in 2014
General Elections.
~ The current
government is led by Bhupinder Singh Hooda led Congress.
~ In the
recently conducted Lok Sabha elections, BJP won 7 out of the 10 Lok Sabha Seats
with 35% vote share. In a multi party contest with 3-4 major parties
contesting, a 35% vote share is very significant. With Alliance partner HJC(BL)
vote share of 6%, the vote share of NDA was 41%. In the Lok Sabha elections,
BJP alone was leading in more than 53 seats.
~ However
General elections are different from state elections. A voter can vote
differently for State elections and General Elections. Things are not going to
be that easy for BJP in Haryana. Leading in 53 assembly segments does not mean,
they are likely to win 53 seats in coming elections. INLD is the main
opposition party in Harayana with 31 seats. BJP just has 4 members in the
current assembly.
~ Some of the
factors that is against the ruling congress government is 2 full terms of anti-incumbency
and land scams. In the previous assembly Congress had 40 members out of 90 and
it was governing with external support.
~ With AAP
deciding not to contest Haryana Polls and anti-congress and anti – Hooda mood
in the state, we feel, in such a scenario the Major natural beneficiaries would
be INLD and BJP.
~ Based on
the above observations, We believe Congress could be big loser in Harayana with
less than 15 seats. Incase BJP-HJC contest together, they will get more than 45
seats and form government on their own. In the event of BJP fighting it alone
we believe BJP would get more than 40 seats but would need external support to
run the government which could be available from independents or poll-poll pact
with HJC. Either ways we will be seeing a BJP CM and BJP government in the
state.
JHARKHAND
~
The Jharkhand Legislative Assembly election, 2014 will be held in
late 2014, to select the 82 members of the Jharkhand Legislative Assembly, which ends
its term on first week on January 2015.
~ The BJP is
on a good wicket in Jharkhand. By winning 12 of the 14 Parliamentary
constituencies, the party registered the best performance ever in the State in
the last Lok Sabha election. Shibu Soren’s JMM which is sharing power with
Congress in the State won 2 seats, while Congress came a cropper. With a vote
share of a whopping 40 per cent, the BJP is now the number 1 party in Jharkhand.
~ Even after
adding the vote share of next 4 parties Namely Congress, JMM, AJSU and JVM the
vote share was not close to BJP’s vote share of 40%.
~ Some of the
factors that is favoring BJP is Recent switchover of major leaders from smaller
parties to BJP. Association of Voters with ruling party at the centre for
benefits to the state. The Voters are
able to see development activities in the neighboring state of Chattisgarh
where BJP is in government since long.
~ Based on
the above observations, We believe Congress and JMM could be big loser in Jharkhand
with less than 15 seats each incase they contest together like Lok Sabha
elections. Incase JMM and Congress decide to contest separately they will get
seats in single digits. There is no strong regional Satrap like Nitish Kumar
and Lalu Prasad Yadav who can tie-up to
stop BJP’s rise in Jharkhand like they did in recent Bihar- By polls.
~ Since it’s
15 years of formation Jharkhand has seen 9 governments and 5 chief ministers.
The possibility of a BJP government this time with simple majority is very much
likely this time.
JAMMU
AND KASHMIR
~
The Jammu & Kashmir Legislative Assembly election, 2014 will be
held in late 2014, to select the 87 members of the Jammu and Kashmir Assembly, which ends its
term on mid January 2015.
~ The 4 major
parties of the State are PDP, National Conference, BJP and Congress.
~ In the
recently conducted Lok Sabha elections, BJP won 3 out of 6 Lok Sabha seats with
a vote share of 32.4% while PDP won the rest Lok Sabha seats.
~ The Lok
Sabha Constituency of Anantnag, Baramullah and Srinagar has 46 assembly segment
seats out of 87. Whereas Jammu, Udhampur and Ladakh has 41 Seats amongst them.
Due to Polaristaion of Votes and heightened atmosphere BJP will sweep assembly
constituencies in Jammu, Udhampur and
Ladakh whereas PDP will sweep the Assembly seats in Anantnag, Baramullah and
Srinagar. BJP is certain to win more than 30 seats whereas PDP will win more
than 35 seats.
~ BJP’s vote
share was less than 2% in the Kashmir region in recently conducted Lok Sabha
Polls. Since BJP has zero presence in 46 seats of the Kashmir region out of 87
seats in J&K, it is unlikely to win any seats from there and even if we
assume it scores 100% in remaining 41 seats in Ladakh, Udhampur and Jammu
region it will still not be able to get a simple majority. Due to ideological
differences and polarization of votes, BJP further will not find any external
support from any elected member. In such a scenario BJP forming a government in
Jammu & Kashmir looks unlikely.
~ BJP would
have to be content with the post of Leader of opposition.
~Only PDP
could be in position to form a Government with external support from like
minded parties.
TRADING
STRATEGY
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