In final stretch of polls, markets raise a vote of confidence
MUMBAI : Investors in India’s equity markets seem to have regained confidence about political and economic continuity heading into the last leg of the national election. One clear indicator of this is that the net value of the marketwide options' open position plunged from ₹4.96 trillion on 7 May to ₹91,149 crore on 24 May, a day ahead of the sixth phase of the election. The last phase of voting will be held on 1 June, and the election results declared on 4 June.
The value of the marketwide open position is calculated by deducting the value of the index and stock put options from the value of the index and stock call options. The steep decline in the marketwide open position value indicates that investors selling call options, or bears, have been forced to cover their short positions—essentially punts against an unfavourable electoral outcome. The short covering was behind the benchmark Nifty’s rally from 22,302.50 points on 7 May to 22,957.10 on 24 May.
On Monday, 27 May, the Nifty ended nearly unchanged at 22,932.45 points. Also read | Why the national election is making the stock market swing wildly “Markets are anticipating political continuity, emphasised by the short covering seen so far," said B. Gopkumar, managing director and chief executive of Axis Mutual Fund.
“The only thing to be seen is the margin of victory on 4 June." Indications are that more shorts or bears will be squeezed out by 1 June, say analysts anticipating a victory for the incumbent Bharatiya Janata Party-led National Democratic Alliance. They caution, however, that the market reaction on 4 June, the day of the official counting of votes, will depend on the margin of victory for the BJP. The market had baked in a sweeping victory for the NDA
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