Before elections, Ridham Desai of Morgan Stanley explains why market prices are in "consistency."

 Before elections, Ridham Desai of Morgan Stanley explains why market prices are in "consistency."

Since the present administration's policies and capacity to go on with plans to generate development are viewed as significant factors in the positive narrative about India's growth, the outcome of the general elections next year will be a critical event risk for the country.

Despite the significant risk associated with next year's general elections, Ridham Desai, MD and head of India Equity Research, said in an exclusive interview that the market is expected to stay positive and trade depending on the results. Control over finances.

The past thirty-five years have seen a shift in the market toward valuing sustainability. The market is an animal that dislikes change. Thus, continuity will be the cost. If there is disagreement after that, it will respond just as it did in 2004. In 2009, the reverse occurred," he said.

Since municipal elections are six months away, Desai said it is hard to tell how the market would value the risk associated with them at this point. "It's difficult for me to tell right now because I have no idea what the cost will be on the day of the election counting. Thus, that will determine it. Furthermore, we must not lose sight of the other worldwide events that might occur in the meantime."

"My basic hypothesis is that the market will weigh the government's continued existence against its actual results before determining how best to respond. The market is not obliged to respond right away if the price continues to rise and you get the same outcome. It won't go much higher if the outcomes are the same as those that have already been priced in, he added.

However, we should be ready for a rather significant market collapse if there is both discontinuity and price continuity in the market.But, things change if the market's prices suddenly become discontinuous and reverse for whatever cause. That's "not my base case," however, according to Desai.

The path of the market will be determined by a number of unlikely factors, including how the Fed will manage interest rates, the behavior of crude oil prices, if China's growth will resume, and whether the US economy will contract or enter a recession. For India, a major risk will be how the general elections are conducted the following year. This is due to the optimistic narrative surrounding India's development, which is attributed to the administration's policies, prowess in advancing growth-promoting programs, and adept handling of the country's geopolitical environment.

desai asserts that there are several approaches to managing this risk. Investors might purchase IT services equities at the portfolio level to provide some consistency to the investment. Hedging techniques via the options market is another method to play it.

"To protect your portfolio against the danger of a market downturn, you may hedge it. Alternatively, you might take the chance of investing in cash and avoid it, since you wouldn't want to assume a loss and then return based on the outcome of the election, according to Desai.

Depending on his level of risk tolerance, each investor must choose how best to manage the risk.