BofA-ML pricks poll bubble: India’s growth depends on global cycle

As per the American brokerage Bank of America-Merrill Lynch (BofA-ML) report titled, ‘Will markets be third time lucky? Three big ifs: Polls, the El Nino, and the dollar’, the global economic cycle drives growth far more than who rules in India.
Excerpts of report Will markets be third time lucky? Three big ifs: Polls, the El Nino, and the dollar’

  • The BJP led NDA has a “fighting chance in around 425 seats out of the 543 seats.
  • On Bihar, the entry of LJP in NDA fold is particularly sweet for BJP since LJP was part of the NDA in 2002 before it left the alliance.
  • In both the past two Lok Sabha Elections (2004 & 2009), the market behaved irrationally: in 2004 it lost 15.9 % even as growth was picking up and in 2009 it rallied 15 % on the result day just before growth began to fall.
  • On both the occasions, the market did not get the poll outcomes correctly.
  • The Indian market should look more at the global economic cycle and its impact on growth than who rules in India after Lok Sabha Elections 2014.
  • Warned that after talking to over 20 equity and fixed income investors in Singapore, the forex market players would be playing it safe and square off their positions before the polls.
  • The real test for the investors will be impact of the three big ifs facing the country-the polls, the El Nino and the US dollar.

Note: BofA-ML is the corporate and investment banking division of Bank of America.  (Headquarters: New York, United States & Founded: January 1, 2009).