Markets under three scenarios of NDA winning the mandate

If NDA gets between 240-271, the markets would be disappointed, if it gets between 271-292 it would be broadly neutral to positive for markets and if NDA gets more than 291, then it would be seen as  significantly positive by markets

Exit polls released by several media predict a clear mandate for the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government. The NDA is predicted to win between 249-340 seats (mean: 285) of the 543 seats in the lower house (272 seats are required to form a simple majority), while the ruling Congress-led United Progressive Alliance (UPA) government is predicted to win between 70-148 seats (mean: 105). If the exit polls are right, then a majority for the NDA government will be taken very positively by the markets, says Nomura in a research note.


"Notwithstanding a possible knee-jerk market reaction on 16th May, the exit polls confirm and strengthen our baseline expectation of a stable NDA-led government, which is a positive outcome, in our view. This, along with a gradual improvement in the growth outlook in 2015, a credible central bank and easing macro-imbalances bode well for India’s medium-term economic prospects. We expect real GDP growth to rise to 5.0% in FY15 and further to 5.7% in FY16 from 4.7% y-o-y in FY14," the research note added.


However, Nomura said while viewing current exit polls it is important to highlight that both the opinion and exit polls misjudged final results in 2004 and 2009. In 2004, both opinion and exit polls were predicting an NDA win, and while the exit polls were able to capture the loss of momentum for the NDA, none of the agencies were able to predict what turned out to be a convincing Congress-led UPA victory. In 2009, both opinion and exit polls did predict an UPA plurality, but they were mostly pointing to a hung parliament, whereas the actual results showed an almost clean verdict for the the UPA government.

According to the 2014 exit polls, among the swing states, the BJP is predicted to win 45-54 out of 80 seats in Uttar Pradesh as against 10 in 2009 and 19-28 out of the 40 seats compared with 12 in 2009 in Bihar. Among the regional parties, All India Anna Dravida Munnetra Kazhagam (AIADMK)-led by J Jayalalitha and the All India Trinamool Congress (AITMC) led by Mamata Banerjee in West Bengal are likely to emerge strong.


Nomura said, with all due respect to the pollsters concerned, the wide range between the lowest and highest forecasts (i.e., about 90 seats) confirms, in its view, as proved to be the case in 2004 and 2009, that the exit polls should be treated with some caution.


Consistent with this, Nomura sees three main scenarios, like...


1. The NDA secures a solid plurality of between 240 and 271 seats: given the significantly higher forecasts offered by some pollsters, an outcome in this range is likely to prove something of a disappointment to markets. It would, nevertheless, represent a solid plurality, in our view (and be a better outcome for the NDA than what the majority of pre-election opinion polls were predicting). It would require the NDA to enter into negotiations with a number of smaller parties to form a solid (i.e., around 300 seats) majority government. Although the NDA would be in a sound position to do this, such negotiations would likely be noisy and involve some trade-offs on both substance and

ministerial portfolios.


2. The NDA secures a slim majority, i.e., 272-290 seats: we think that markets would likely see this (mid-range, relative to exit polls) outcome as broadly neutral to positive, since the NDA would likely still look to bring in one or more smaller party to ensure greater stability (given the somewhat fractious nature of the current coalition). However, it would be in a strong position to negotiate and we believe that the resultant government would be driven largely by an NDA determined agenda.


3. The NDA secures over 290 seats: we think that in these circumstances, the NDA would probably opt not to bring other parties into the coalition (with the option of doing so downstream if, at a later stage in the parliamentary term, there were defectors from its ranks). This would be seen as a significant positive by markets, in our view, as it should bolster Mr Modi's command over the coalition partners and over dissident elements within the BJP.


Nomura says the exit polls confirm and strengthen its baseline expectation of a stable NDA-led government, which is a positive outcome. "We believe that India's medium-term outlook is likely to gradually turn positive. With growth bottoming out, increased credibility of the Reserve Bank of India (RBI) and faster execution cycle likely post elections, we believe that India's growth mix will change away from consumption towards investment and macro-imbalances will gradually correct. This increased macro stability indicates that the economy is at an inflection point. We expect real GDP growth to rise to 5.0% in FY15 and further to 5.7% in FY16 from 4.7% y-o-y in FY14," it concluded.


Sensex zooms to all-time high but outflows from equity funds continue

Equity mutual funds register a net outflow of Rs160 crore in April, as sales fail to pick up, while outflows continue

Equity mutual funds continued to face redemption pressures in April as the market indices—Sensex and Nifty, continue to rally ferociously upwards. Though both redemptions and purchases of equity mutual funds were lower compared to March, higher redemptions led to a net outflow of Rs160 crore. Sales of equity mutual funds totalled Rs5,621 core, higher than the average of the past 12 months of Rs3,841 crore. Redemptions too, were above average. Redemptions in March equalled Rs5,781 crore, as compared to the past 12-month average of Rs4,613 crore. Over the past 12 months, equity mutual funds reported a net inflow in as many as six months. Over the past one year, as much as Rs9,157 crore has flowed out of equity mutual funds.

With the heavy outflows, equity assets under management (AUM) have reported a lower growth compared to that of the market. While the Sensex may have moved up by 15% to 22,417 from 19,504 over the one-year period ended 30 April 2014, equity AUM has grown by just 6.56% over this period. Only one new fund offer (NFO) was launched in April, bringing in Rs64 crore.

After several months of reporting a decline in equity folios, in April, the number of folios increased by 0.39 million or 1.32% to 29.57 million. Unfortunately, the increase in folios has been marginal and not sufficient enough to offset the huge decline in folios over the past year. Over the year ended 30 April 2014, mutual fund folios declined by 10% or 3.34 million folios.




Suiketu Shah

3 years ago

Problem is chronic.People have lost faith in MF due to large scale manipulation and false promises by almsot all fund houses.I see even more equity mf selling at we peak 16/19 May and rightly so.


3 years ago


Observe Financial Hygiene
Make sure you get your nomination right

At any discussion about money and investments, people agitate about every 0.25% difference in interest rates. Yet, large chunks of money are lost to temptation (lured by dubious ponzi schemes, hot stock tips, or weak companies offering higher interest on fixed deposits). People agonise over saving enough for their families (parents/children) but don’t observe basic financial hygiene to ensure that their heirs and loved ones are protected and get access to their savings without hassles. The simple precaution of mentioning a nominee for your financial assets like fixed deposits, shares, debentures and apartments (in Maharashtra) will ensure that the assets don’t remain locked in litigation but go to your heirs or a person you trust. Unfortunately, people are notoriously lazy about filling out the nominee column; and even those who do, often, forget to update it, sometimes with disastrous consequences. 
Consider this. A man makes a Will when he is unmarried, leaving all his wealth to his only sister. He does not bother to change the Will after he is married and has children. Unfortunately, he dies in an accident. The sister stakes a claim to the Will. It leaves his widow high and dry. 
Here is another true story that is stranger than fiction. It was reported by the Bangalore Mirror on 21st April. Jayasheelan, a divorced male, died without leaving a Will. His mother was his immediate heir and entitled to inherit all his assets, but for a wicked twist. Jayasheelan, had named his wife as the nominee in his bank account, but failed to change it when he divorced her in 2006. There was a settlement of Rs10 lakh and his wife had remarried in 2007. The man had a hefty Rs1.44 crore in his account and died a few months after the divorce. His mother learnt of the nomination from the bank. The divorced wife wasn’t going to pass up the opportunity to get the money, so a legal battle ensued. Finally, nearly seven years later, the Bengaluru high court ruled in favour of the mother saying that the wife, who had remarried, could not claim succession. It is a landmark judgement that upholds the right of the legal heir over a nominee. If only the divorce lawyer had impressed on Jayasheelan about the need to get his financial documentation right and to check his nomination as part of the divorce clean up! 
If Jayasheelan were living in Maharashtra and his assets were dematerialised shares or debentures held in a depository account, the mother would have been a loser. A very curious Bombay High Court judgement has held that, under the Companies Act, the rights of the nominee are superior to that of a legal heir who inherits through a Will.  The answer is diligence!
At Moneylife Foundation’s financial safety workshops, we emphasise the need to make a Will and regularly update the nomination for bank accounts, insurance policies and flats. An annual ‘check-up’ of your finances is important, because there are too many horror stories about the consequences of ignoring basic financial hygiene or diligence. A nominee gets access to assets by simply producing a death certificate and identity proof, without the process of obtaining a succession certificate, probate and other hassles. 



Bapoo Malcolm

3 years ago

Google has 2.28 crore searches for "nomination". Thst is a few lakh more over the last few months.

Until the terminolgy and its effects are settled, problrms will continue to occur. Suggest that since a new government is in place, and since a new broom sweeps clean, Moneylife should initiate a move to properly define the term.

The problem is mainly due to the fact that testators are in the habit of fooling people. This comes from personal experience. To please relatives of friends, they file nomination papers. This the relative can see. But behind their backs, the testator executes a will with a different person or set of persons as legatees. The will is then kept secret.

While my perosnal view is that the will is final and most sacrosanct, legislation to this or other view is necessary to avoid complications.

Moneylife should take up this initiative and also include the non-necessary insistance on probates where it can be avoided, e.g. in the case of company share transfers. Immovable assets like land and buildings, flats, apartments, must be transferred after the process of registration.

Bapoo M. Malcolm

Sudheer M

3 years ago

On the spot Ms.Sucheta Dalal. I feel the laws have been complicated and more confusing with complicated judgement criss-crossing the same.

Nomination rules should be made simple. My take is, Nomination should be the process of naming a person who can receive money on behalf of the deceased person and distribute the same according to the will or according to any of the laws in absence of the will.

If the law makers want nomination to be having superiority over the will, then make it in such a way for all transactions/assets rather than having some of them super-ceding and others not.

My dream would be that the process of recording a will also should be made simple and made in such a way that there is an authority by government where in one can create a will online and store the same.


sivaraman anant narayan

In Reply to Sudheer M 3 years ago

Your second para comment is bang on and all legal interpretation should also be similar. Nomination only absolves the bank/hsg society etc from their responsibility. Ultimately will should supercede nomination as far as rights go and sooner or later the Bombay HC judgement is likely to be reversed. From a practical point of view everyone must match the nomination with their will, asset by asset.

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