NDA or ragtag coalition? Take exit polls with a pinch of salt!

The seventh and the last phase of the over one-month-long elections concluded on Sunday.

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NEW DELHI: An out-of-turn rally in domestic stocks on Friday puzzled many on Dalal Street, with at least one market veteran speculating that exit poll results may have got leaked.

The gains, despite a global selloff, were seen by market pundits as rising hopes among traders and investors that the poll will result in a stable government at the Centre.

Exit polls released on Sunday evening projected a conformable win for the BJP-led National Democratic Alliance (NDA) government with Times NOW-VMR putting the seats for the alliance at 306. It saw the Congress-led UPA winning 132 seats with 84 for the others.


As the nation remained glued to the exit polls that will decide the course of the market over the next three days, some analysts cautioned against taking exit polls too seriously. Historically exit polls are notorious for getting it totally wrong, and one must take them with a pinch of salt, they warned.

The seventh and the last phase of the over one-month-long elections concluded on Sunday.

In the last three elections, exit poll results were not so accurate.

In 2004, exit polls wrongly forecasted a repeat victory for the BJP-led NDA coalition, while in 2009, they meaningfully underestimated the Congress-led UPA’s seat share, foreign brokerage UBS pointed out in a note.
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2004

“In 2014, while exit polls correctly predicted a victory for the BJP-led NDA, they significantly underestimated the margin of victory,” UBS said.

2009

The market is likely to see some of its most volatile days in the coming week, said Milan Vaishnav of Vadodara-based Gemstone Equity Research & Advisory Services.

On Friday, BSE Sensex climbed 537 points, or 1.44 per cent, to 37,930, while the NSE barometer zipped passed the 11,400 mark.

Analysts say informal betting market is predicting a BJP win, but with the support of allies.
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2014

Gurmeet Chadha of Complete Circle Consultants said it is difficult to predict poll outcome based on exit polls, but the indication from informal betting markets is that the market is factoring in a repeat win for the NDA government with lesser number of seats. We will have to wait. It is too difficult and too close a call.”

The domestic indices are very likely to side with a gap on either side on Monday.

Vaishnav, who sees a gap start for the indices on Monday, said: “In 2014, at the time of election results, the market was about to complete a massive ascending triangle formation on the long-term weekly charts. With the favourable general election outcome, Nifty broke out of that formation and what followed was a multi-year uptrend. This year, we are placed at a juncture where Nifty has achieved its price targets resulting out of measuring the implications of a breakout.”

“We feel any euphoria that can follow a favourable outcome of the general elections will have limited impact. We may see Nifty rise steeply and form a fresh high, and this positive move will remain limited to a certain extent. On the other side, any pain caused by an unfavourable election outcome will result in comparatively much deeper pain.”
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