How will the Lok Sabha elections affect the stock market? “Correction is inevitable.”

After the Lok Sabha elections, profit-booking may occur in the Indian stock market since the results would serve as a catalyst, according to brokerage company Bernstein. A pre-election frenzy is intensifying since the BJP alliance may win more than 400 seats, it was further said.

“With sky-high expectations having set in, a number near the 2019 value might trigger a short-term negative reaction,” wrote Bernstein analysts Venugopal Garre and Nikhil Arela in a report. “But we believe profit-booking post-elections is coming anyway, and the election results will only serve as a trigger point for the inevitable,” they wrote.

According to the experts, manufacturing and capital expenditure stories will continue to be important, but ultimately the macro narrative will take center stage. If it continues to be strong, there may be some minor drawbacks. The trading business pointed out that surveys suggest the governing National Democratic Alliance (NDA) might win as many as 411 seats.

“There will inevitably be a correction, and markets that are just searching for an excuse to drop could respond excessively to a mood that might not have any logical significance. On the surface, 300 seats would still give the governing party the absolute majority and create a structure like that of 2019, which is to say, a continuation of power in terms of both amount and continuity. Nevertheless, the experts said that it would be seen as a “below consensus” outcome and that a response is inevitable.

According to the company, this may finally signal the end of the present market craze, which has lasted for a whole year.