Don’t let Mr Moody’s tantrum upset you a great deal, investing still isn’t a bad idea

The stock market had been building up steam over the past few trading sessions as it bet on the BJP-led NDA coming back to power with a comf...

The stock market had been building up steam over the past few trading sessions as it bet on the BJP-led NDA coming back to power with a comfortable majority. As exit polls injected an element of doubt into that assumption, the market panicked and crashed. But investors should keep their cool.

Markets worldwide hate uncertainty and political uncertainty is the worst of the lot. What you are seeing is the Indian stock market saying: ‘‘I don’t like this change in situation. I thought the NDA was coming back to power and was happy about it. This change makes me panic and lose value.’’ So if Mr Moody Market is unhappy, should you panic too sell off your holdings? The answer from across the financial sector is a resounding no. Don’t panic, markets are going to be volatile and may even lose more value in the next few days till the election results are finally declared. But there are good reasons why the long term investor should stay in the market. First, the exit polls have been wrong before and this is not the final verdict.

Says Rushabh Sheth, head Equity Funds, Kotak Mahindra Mutual Fund: ‘‘There is no reason to panic. Exit polls have been proved wrong often and half the country is yet to vote.’’ Agrees Motilal Oswal, chairman of Motilal Oswal Securities: ‘‘I am of the firm view that the NDA will come to power and exit polls have been proved wrong before.’’

Two, even if these polls were to be correct, the fundamentals still remain strong and do not affect the long term investor. Says Sheth: ‘‘There is no compelling reason for the market to lose value like this.’’ The fundamental strength of the Indian economy, corporate growth and long term direction of reforms says that the market will recover after the initial panic.

Says Gajendra Nagpal, Country Head (Sales) India Bulls: ‘‘The markets are today moving on fundamentals and those have not changed.’’

These views are echoed across brokerage houses (who actually stand to gain the more you buy and sell), mutual fund houses (who do the same) and market experts. What should you do? If you are a long term investor, don’t get carried away by the noise in the market. Hold your position, even if the market sinks lower over the week. If it does drop, this is a great opportunity to buy at valuations that you had lost earlier.