Exit poll jitters can hurt Dalal Street

American depositary shares issued by Indian companies plunged 4% to 7% in US trading late on Wednesday as exit poll results announced by a phalanx of news channels predicted neither the Congress-led UPA coalition nor the BJP-led NDA getting enough votes to comfortably form a government.

That could spell negativity for the markets on Thursday, said experts. VK Sharma, director-research, Anagram Stockbroking, said first of all, the global rally itself is beginning to correct

“Secondly, the market had pencilled in an expectation that NDA will come to power. The exit polls itself doesn’t seem to give any clear picture. So the market is taking it as a negative and is likely to tumble tomorrow. But exit poll results in the past have gone wrong, so there is nothing final yet till Saturday,” Sharma said.

Sanjay Sinha, CEO of DBS Cholamandalam Mutual Fund, said the market will continue to be volatile over the next two sessions. “Eventually, of the four possible scenarios —- two with either Congress or NDA at the helm would be a positive. A Mayawati-led coalition will lead to a sharp correction. Anything with the Left is structurally negative,” Sinha said.

ICICI Bank lost 3.2% to $21.77 while HDFC Bank slid 1.7% to $77.48 on the New York Stock Exchange.

It was the same story on the technology-heavy Nasdaq stock exchange with Infosys Technologies dropping 1.6%.

Bloomberg reported that the CHIndia index, which includes Indian American depositary receipts, dropped 2.4%.

US fund managers and corporates are also likely to give India a wide berth till the election dust settles.

Michael Hartnett, head of emerging market equity research at Bank of America Merrill Lynch Research, said India signalled “resilient growth” on the back of lower oil prices but negatives included “rich valuation, politics and small room for countercyclical policy.”