Analysts’ suggest investors to buy put options if the market opens lower on Monday to hedge their long positions while some are advising clients to remain in cash at least for the next 3-4 days

A neck-and-neck contest between ruling BJP and the main opposition party Congress could spell trouble for markets, say experts based on the recent Exit polls which have come out post market hours on Friday.

Weak global cues, as well as state election uncertainty, gripped markets in December. The S&P BSE Sensex which rallied by about 5 percent in November lost 521 points or 1.44 percent in the first week of December. The Nifty50 too fell by 183 points or 1.68 percent for the week ended 7 December.

A strong close on Friday when might not mean that momentum will continue on Monday when the market will resume trading. The S&P BSE Sensex closed 361 points higher at 35,673 while the Nifty50 ended 92 points up to close at 10,693 on Friday.

Most of the exit polls suggest that Congress is likely to make a comeback or at least give a tough fight to the ruling BJP in Chhattisgarh, Rajasthan as well as Madhya Pradesh. From a market point of view, the other two states like Mizoram and Telangana are not material to the markets.

What should investors do?

The Nifty50 formed a bearish candle on the weekly charts. The index has decisively broken its 200-days moving average (DMA) placed at 10750. Bulls will only be able to take control once the index decisively closes above this level and head towards 10930-10950 levels.

Analysts’ suggest investors to buy put options if the market opens lower on Monday to hedge their long positions while some are advising clients to remain in cash at least for the next 3-4 days.

Shrikant Chouhan of Kotak Securities said that investors can look for buying put options if BJP seems to be losing. He further added that a loss in Assembly elections would change the sentiment dramatically for the upcoming General Elections for BJP.

Technical charts suggest that as long as Nifty holds above 10650 zones it could extend its gains towards 10750-10777 and then towards 10850 zones while on the downside crucial support is seen at 10600 levels, and a break below could take the index towards 10550-10500.

source: moneycontrol.com