Political continuity positive for market as policy momentum continues: Motilal Oswal

As the countdown begins for the upcoming General Elections, market sentiment is buoyed by the anticipation of political continuity with the NDA government potentially clinching a third consecutive term. Gautam Duggad, Head of Research at Motilal Oswal Financial Services, sheds light on the prevailing market mood and its implications.

According to Duggad, the market has been factoring in the likelihood of political stability since the December state elections. The prospect of a majority government led by a single party for the third time is a rarity, and market players are responding positively to the potential policy momentum that may follow.

Duggad said, "If you go by the trends which are coming in from different polling agencies, it does suggest that there is going to be a political continuity, which augurs well for market because the policy momentum continues. There is no disruption in that sense and obviously, that is what market I think has been liking."

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Duggad notes that the market experienced an 8% rally post the state election in early December, accompanied by a notable surge in Foreign Institutional Investor (FII) inflows, totaling $8 billion for the month. Despite some outflows in January, when combined with macro and micro tailwinds, the overall market structure appears promising.

While acknowledging that some of this optimism is already reflected in current prices, Duggad remains cautiously optimistic about the market's momentum, citing concerns about the broader market, particularly midcaps and smallcaps. He points out that these segments appear overextended in valuation compared to their underlying fundamentals.