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Is there more steam left in the rally or will it fizzle out?
The benchmark Sensex has gained 3.7% since the UP polls began and currently trades at 20x one year forward

Ambareesh Baliga, Independent market expert

The rally won’t last long and it is quite likely that it will be sold into. After the initial euphoria, the market is showing signs of settling down. We are overdue for a correction as the indices had started trending north right from the day Uttar Pradesh went to polls. The win could also see the opposition devising new tactics to delay policy changes that the Modi government would want to push. Also, the possibility of more radical measures (the likes of demonetisation) cannot be ruled out and that poses a risk. If the Fed decides to hike rates, FIIs could take some money off the table. Valuations were already stretched in the absence of an earnings recovery and the current rally has only made it further expensive. With quarterly results due and the monsoon forecast just around the corner, the market is treading on thin ice.

Ajay Bodke, CEO and chief portfolio manager, Prabhudas Lilladher

The BJP’s thumping win in the assembly polls will help the Centre pursue structural reforms. The GST is a mere formality now and the win will embolden Prime Minister Modi to aggressively expedite key economic reforms around land and labour that have been hobbling the country’s GDP growth. Other programmes such as Mudra loans, LPG cylinders, affordable housing, rural connectivity and direct benefit transfer of all subsidies will continue to gain momentum. So, while structural economic reforms such as fiscal prudence, inflation control and infrastructure development will remain in focus, a well-thought out pro-poor policy will ensure that rural demand remains strong. In the short term, ample liquidity in the market and the new found political optimism should give a leg-up to the current rally.

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