Election Results may throw a buying Opportunity

The markets corrected about 1.3 pc. The election results will set the tone for the markets. Let us check out the markets technically ad also fundamentally.

1. The best case scenario for the markets is a Congress-SP coalition in UP. If the Samajwadi wins alone it means a fresh set of headaches. Mulayam will start efforts to re-start the Third Front which can eat into Congress votes the next General Elections. If there is President's Rule, it will also be bad for the markets. Congress doing badly means populist measures over the next 2 years.

2. The Congress needs to finish much higher than the projected fourth place. 50-60 seats will be seen as a setback to Rahul Gandhi. The best case is Congress getting 100+ seats and a coalition with the Samajwadi Party.

3. Technically the entire up move 4532 - 5630 can be labelled as wave A with a length of 1098 points. Wave B is ongoing which will correct this entire up move to 5370 (done),5210, 5081 or 4951. Below 4951, the entire up move may be in danger. This means that the 5080-5200 is a buying zone if we get there.

4. Now, this down move from 5630 will have 3 legs A, B and C. A is over at 5268.B may be over at 5459, or B may subdivide into a,b and c. a is 5268 - 5459, b is 5459 to 5298 and c may be till 5500.

5. Which also means the market is decisively going to go up if it sustains above 5500.

6. The Budget and the RBI policy will be up next after the election results. Election results typically produce knee jerk negative reactions which can be buying opportunities. The last election was an exception.

I still believe we are not in a long term bull market yet and this market should be used for trading opportunities. How the market behaves around 5750-6000, if we get there will throw clues. I would use this rally to trade in stocks identified by Lakshmi and me, reduce their cost of acquisition to a 5 % dividend yield and then sit tight on those stocks for the next 5 years.