Markets could move higher between 5-10% from current levels, says Gautam Chhaochharia of UBS

Gautam Chhaochharia, MD & Head of India Research at UBS Securities, spoke to CNBC-TV18 about the exit poll outcome and what it means for the markets.

“The exit polls are a positive surprise versus the opinion polls led anchoring of market expectations,” Chhaochharia said on Monday.

"If these results get repeated on May 23 then tactically the Indian market would outperform the global markets. However, what happens beyond that will depend on fundamental challenges specific to fiscal and growth dynamics," said Chhaochharia.

On the policy front, Chhaochharia said, “What the government policy is around fiscal, reforms, disinvestment, funding arrangement for the banking sector – those policy steps will drive the market beyond the next two-weeks to one-month."

“In our framework, market could have an upside of anywhere between 5-10 percent from current levels,” said Chhaochharia.

Talking about the risks to the market, he said, "There are two big risks, one is global factors and two, is policy stance. Global factors will matter for Indian markets despite strong domestic flows."

Importantly, investors would watch out for reforms narrative, said Chhaochharia. “For last five years, market multiples have re-rated because of the narrative around macro stability, around reforms and finally having a narrative around getting growth back on track over the longer-term.”

"If the government sticks to mix of populist cum reformist stance then one will have to wait to see how the market reacts," said Chhaochharia.