Market Volatility Levels Could Surge Near Election Results, Says Analyst
Major corrections may be seen in the markets after the election, according to an analyst.
The India VIX saw a major spike on Tuesday, as it closed over 2.47% higher. The index could even hit 30 to 34 levels as the election results come nearer, according to analysts.
Aditya Agarwala, head of research and investments at Invest4edu, highlighted that a similar trend was witnessed by equity markets during the 2009 and 2014 elections, when the VIX touched 34 and 30, respectively. “These are periods of minor decline in larger uptrends.”
Though the current government is predicted to return to power, it will be intriguing to know the seat count, according to Agarwala. The VIX has broken out of 17 and a further move beyond this mark can lead the benchmark to a bearish territory, he said.
“If this happens, then we will see a spike in volatility and fear in the market can lead to profit-booking,” he said.
"Mid and small caps remained under the grip of the bears, which dragged the overall markets lower. As the day progressed, the index compounded its losses. However, in the last session, some recovery was seen from the lower levels, and Nifty 50 settled the day at 22,302.50, with a loss of 140.20 points," said Aditya Gaggar, director, Progressive Share Brokers Pvt.
Among the sectors, FMCG extended its morning gains to be the outperformer of the day, while a steep recovery in the IT counters helped the sector end the day in green. Conversely, realty and metal were the major laggards, Gaggar said.
The NSE Nifty 50 ended 140.20 points, or 0.62%, lower at 22,302.50, and the S&P BSE Sensex closed 383.69 points down, or 0.52%, at 73,511.85.
The fourth quarter earnings of 2024 were not "rosy", said Dharmesh Kant, head equity research at Cholamandalam Securities Ltd. It was just the banking and the non-banking financial companies that have delivered 60% year-on-year growth, he said.
NIMs are getting stable and there is some chance that compression in quarter one and quarter two, along with asset quality will remain stable, he said.
Kant expects major corrections in the markets to take place post-election.
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