The One and Only Stock Picking Strategy to Adopt Post the Exit Polls - The 5 Minute WrapUp by Equitymaster
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The One and Only Stock Picking Strategy to Adopt Post the Exit Polls

May 21, 2019

Radhika Pandit, Research Analyst

As soon as the last phase of the voting wrapped up, it was time for the exit polls to be released.

That happened Sunday night. Most predicted a BJP-led NDA victory.

Where they differed is in the actual number of seats that the NDA would eventually muster.

Yesterday, stock markets celebrated this result, and towards close the Sensex was up by an impressive 1,400 points.

Predictions are rife as to where the markets will move next.

Is there scope for more gains? Or will the markets remain where they are since a NDA victory has already been factored in?

If the BJP on its own garners a majority, then another in the rally in the markets seems quite likely.

Of course, these are exit polls. They have not necessarily been accurate in the past. The actual results will be out on May 23.

My point is election outcomes do impact the markets in the near term.

But in the longer term, after the initial euphoria dies down, it will be the nitty gritty of the state of the economy and growth in corporate earnings that will influence the direction of the stock markets.

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Consider this...

In the 2004 elections, the exit polls predicted a BJP-led NDA majority. But it was the Congress led UPA which gained clear majority showing how horribly wrong the exit polls were. Not surprisingly, the stock markets tanked.

But this battering proved to be short-lived.

From 2005 onwards, stock markets went on a big bull run backed by the healthy performance of India Inc.

So you see, for the stock markets to do well, ultimately company earnings matter. Elections are just noise.

In fact, based on the exit polls alone, there are articles in newspapers that point out now is the time to load up on stocks.

But if you have been an investor in the markets for a long time, you would know that investing based on election outcomes is the not the way to go about building long-term wealth.

That's a view Sarvajeet and I strongly believe in.

We are certainly not making recommendations in Smart Money Secrets based on how the election results pan out.

We have been closely tracking the portfolios of super investors since the inception of the service two years ago.

However, while the trigger points for us are bulk/block deals or these super investors having more than 1% stake in the stock, it does not mean that we blindly copy them.

We have our very own Smart Money Score that analyses the strength of the businesses on various important parameters.

And only when these filters are met, do we go ahead and recommend those stocks.

We have recommended more than 20 stocks in the service so far. Mind you, these recommendations have not been based on the possible election outcomes. We made them after we were convinced of the robustness of the businesses and its management as well as the earnings quality.

What's more, we have a clear investing philosophy and stock selection process in place.

We will keep evaluating and recommending high-quality stocks that can build subscribers' wealth, irrespective of who comes to power by the end of this week.

In fact, we are all set to release our upcoming Smart Money Secrets report soon.

Sarvajeet and I will publish it early next week.

So, if you haven't subscribed to Smart Money Secrets yet... you can sign up here.

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Chart of the Day

Once the exit polls were released on Sunday, the markets reacted positively.

The Sensex notched up gains of more than 1,400 points.

Clearly, the prediction of a BJP-led NDA victory has fired up the markets.

But there are two things that history has shown us.

One, is the exit polls should be taken with a pinch of salt. The 2004 elections are a classic case in point where the exit polls predicted a BJP win, while the actual counting resulted in Congress-led UPA gaining clear majority.

Second, near term reactions to elections aside, stock markets in the longer run have been influenced by the Indian economy and growth in corporate earnings.

Indeed, despite the Congress win in 2004 (something not factored in by the markets), the Sensex has been on a major bull run since then.

This, during years when both the UPA and the NDA have been in power.

In the Long Run, Elections Don't Influence the Stock Market

Warm regards,

Radhika Pandit
Radhika Pandit
Co-editor and Research Analyst, Smart Money Secrets

PS: Radhika Pandit and Sarvajeet Bodas, co-editors of Smart Money Secrets, are ready to recommend their next stock. If you haven't subscribed to Smart Money Secrets yet... you can do so here.

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1 Responses to "The One and Only Stock Picking Strategy to Adopt Post the Exit Polls"

CIGANDHI

May 21, 2019

WHAT EVER JUMP ON INITIAL ON SENTIMENTS WAS TO THERE IS DONE, BUT BASICALLY I AGREE THAT IN LONG RUN MAR KET WILL DEPEND ON ECONOMIC POLICY GOVT WILL FOLLOW. IT POLICY ARE TARDY AND PEOPLE WHO WILL HANDLE IT ARE NOT EFFICIENT, NOTHING WILL HAPPEN , ONE MAN CAN NOT DO ALL JOB, IT WILL PRECISELY DEPEND ON SELECTION OF PEOPLE FOR CABINET. I WISH WE HAVE BETTER AND UNDERSTANDING COUNCIL OF MINISTER.

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