SEBI, bourses brace up poll results

New Delhi: With Indian stock markets reaching dizzying heights on hopes of a strong and stable government after polls, investors have started adding ‘defensive’ stocks to shock-proof their portfolios ahead of election results on May 16. At the same time, regulator Sebi, stock exchanges and market intermediaries are also working to ring-fence the systems and infrastructure from any sudden volatility on the results day, or around that date.

 

Officials said ‘mock stress tests’ have been conducted at exchanges under supervision of Sebi to ensure that the markets are ready to withstand any shocks that may arise out of sudden increase in volumes. The preparations are being done while keeping in mind the experience of May 18, 2009  the day when results of last Lok Sabha polls were announced and the markets gained so much that trading had to be halted.

 

That date is still known as ‘Magic Monday’ in stock market as the benchmark index Sensex posted its biggest ever gain of over 2,100 points in just one minute trade after investors were enthused by a decisive verdict in the then concluded general elections. However, the gains were limited to a few investors on that date as trading could not continue for the day. The experience was another extreme on May 17, 2004, soon after the announcement of 2004 Lok Sabha elections, the markets witnessed the worst ever bloodbath on concerns of uncertainty over the economic reforms as the then NDA government was voted out of power.

 

That time also, the exchanges were forced to suspend trading twice to contain volatility, while Rs1,24,000 crore worth investor wealth got wiped out despite all efforts to contain the losses.