My Account
Follow us on:
Powered By
Find & Invest in bonds issued by top corporates, PSU Banks, NBFCs, and much more. Invest as low as 10,000 and earn better returns than FD
Invest Now
Powered By
Unlock Your Trading Potential: Trade like Experts with SEBI registered creators, Learn from Courses & Webinars by India’s Finest Finance Experts.
Invest Now
AMBAREESH BALIGA
Fundamental, Stock Ideas, Multibaggers & Insights
Subscribe
CK NARAYAN
Stock & Index F&O Trading Calls & Market Analysis
Subscribe
SUDARSHAN SUKHANI
Technical Call, Trading Calls & Insights
Subscribe
T GNANASEKAR
Commodity Trading Calls & Market Analysis
Subscribe
MECKLAI FINANCIALS
Currency Derivatives Trading Calls & Insights
Subscribe
SHUBHAM AGARWAL
Options Trading Advice and Market Analysis
Subscribe
MARKET SMITH INDIA
Model portfolios, Investment Ideas, Guru Screens and Much More
Subscribe
TraderSmith
Proprietary system driven Rule Based Trading calls
Subscribe
Curated markets data, exclusive trading recommendations, Independent equity analysis & actionable investment ideas
Subscribe
Curated markets data, exclusive trading recommendations, Independent equity analysis & actionable investment ideas
Explore
STOCK REPORTS BY THOMSON REUTERS
Details stock report and investment recommendation
Subscribe
POWER YOUR TRADE
Technical and Commodity Calls
Subscribe
INVESTMENT WATCH
Set price, volume and news alerts
Subscribe
STOCKAXIS EMERGING MARKET LEADERS
15-20 High Growth Stocks primed for price jumps
Subscribe
India is gearing up for the general elections in 2024. In the lead-up to the polls, the stock market is considered a key indicator of political sentiment and economic stability.
The markets experience heightened volatility as investors, anticipating election outcomes and policy changes, often adopt a cautious, wait-and-see approach, leading to price fluctuations.
According to a Goldman Sachs report, the Nifty 50 has rallied by more than 10 percent over the six months preceding the election results in four of the previous seven elections since 1996. However, this time, Indian stocks appear expensive to the global investment bank.
A historical analysis of the past five elections – in 1999, 2004, 2009, 2014 and 2019 – by JM Financial Services suggests that the Nifty tends to move up in the run-up to a general election. The index moved higher in the six months leading to the election on all five occasions, with an average return of 21 percent.
The Bank Nifty moved up on four occasions – the index did not trade during 1999 – with an average return of 25.5 percent. Barring in 2009, the Bank Nifty outperformed the Nifty in all election periods.
For the Nifty, the minimum return was 8.7 percent during the 2004 election, while the maximum return was 36 percent in 1999.
For the Bank Nifty, the minimum return was 17 percent in 2019, while the maximum return was 37.4 percent in 2014.
Also Read | Will FIIs return to buy Indian equities? US Fed rate pause to benefit India but outlook cautious
Stock movement in the run-up to the election
To understand how stocks and sectors moved in the six months prior to the polls, JM Financial considered 93 current F&O stocks with a trading history since 1999. On the sectoral front, banks – private and state-owned – turned out to be the clear winners, followed by oil marketing companies (OMCs), upstream oil companies and cement.
In the private bank sector, Kotak Mahindra Bank, Axis Bank, IndusInd Bank, ICICI Bank, HDFC Bank, and Federal Bank stocks yielded positive returns in all the analysed election periods. Among public sector lenders, State Bank of India and Bank of Baroda stocks closed in the green in all five instances.
Among OMCs, Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum stocks closed in positive territory in all the observed instances. Upstream oil companies Reliance Industries and Oil & Natural Gas Corporation advanced in all five instances.
Brent crude oil futures during this period closed in positive territory. They were up 1-8 percent during 2009, 2014 and 2019 while in the years 1999 and 2004, they rose by 52 percent and 32 percent, respectively.
Watch | India the economic bright spot amid the global gloom? | Chief Economist Morgan Stanley Exclusive
In the cement sector, Grasim, Ramco Cement, ACC, and Ambuja Cement stocks gained in all instances. India Cements closed in the red during the year 2004.
Election outcome impact on markets
Election results tend to elicit swift and often significant responses from the stock market. A stable government with a clear mandate typically reassures investors, leading to positive market reactions.
Conversely, a fragmented or uncertain election outcome can result in market turbulence. The Bharatiya Janata Party secured a decisive victory, resulting in the formation of a stable government led by PM Narendra Modi, in 2014 and 2019.
Following the announcement of the election results, the stock market responded positively, with the benchmark indices reaching record highs on both occasions as investor confidence was bolstered by expectation of policy continuity and economic reforms.
However, in 2019, after clocking new highs on election result day, the indices fell around 1 percent on profit-booking.
Analysing the one-month and one-year returns after election results since 1999 reveals an average one-month return of -0.2 percent and a one-year return of 12 percent.
Also Read | Global uncertainties prompting shift to bilateral agreements: FM Nirmala Sitharaman
Indian Equities Post-Election Results: Potential Scenarios
According to a report from Morgan Stanley, the 2024 elections could yield different market outcomes based on the results. If the current government secures a clear majority, the market may gain 0 to 5 percent in the three months following the election.
In the event of a coalition government formation in the absence of any party winning a clear majority, the market could decline by 5 to 25 percent.
In the worst-case scenario, where the BJP government loses and the leading party secures fewer than 200 of the 543 elected seats, forming a weak coalition, the stock market might face a significant 40 percent decline.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
Check Free Credit Score on Moneycontrol: Easily track your loans, get insights, and enjoy a ₹100 cashback on your first check!
Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express writtern permission of moneycontrol.com is prohibited.
You are already a Moneycontrol Pro user.
Polls and beyond: Tracking the trend in Nifty, Bank Nifty as India gears up to vote – Moneycontrol
Leave a comment