Portfolio shuffle may see capex-to-defensive switch

The election results are likely to cause a certain amount of market volatility until the shape of the next government is known.

- DEVANGSHU DATTA

The lack of a majority for the BJP implies that the NDA partners will have a bigger say in crafting policy, and the BJP itself may look to change policy to address voter discontent.

In the short run, uncertainty will cause volatility. The Nifty may possibly test supports in the zone of 21,200 again. The 200 Day Moving Average - a benchmark for a healthy bull market is also close enough to that level. A drop below 21,000 could have long-term bearish consequences.

It remains to be seen how institutional investors will react to the political developments. FPIs were heavy net sellers through April and May and they were net positive on Monday, June 3. Domestic institutional attitudes may depend to an extent on mutual fund inflows, which are largely driven by retail attitude. If fund inflows remain strongly positive, the funds will be forced to buy.