Election impact on market

As exit polls predicted a thumping majority for the Bharatiya Janata Party (BJP) in the Lok Sabha elections, markets are likely to see a bull rally from June 3 onwards in the poll result week.

According to market analysts, the exit polls have removed election jitters which have been weighing on markets since last month.

Market volatility was witnessed during the seven phases of voting that ended on June 1.

When we look at the last five general elections, on the day of counting, Sensex gave negative returns thrice in 1999, 2004, and 2019 - of 0.24%, 11.10%, and 0.76% respectively.

Whereas, twice in 2009 and 2014, it had given positive returns of 17.70% and 0.90%, respectively.

One month after the results were declared, Sensex had given positive returns of 22.20% in 2009, 4.59% in 2014, and 0.99% in 2019. In 1999 and 2004 alone, the market had given negative returns of 2.11% and 10.50%.

Six months after the results of the general elections, the market has given positive returns all five times.

Sensex had given returns of 7.56% in 1999, 9.82% in 2004, 35.05% in 2009, 15.71% in 2014 and 4.27% in 2019.

A head of UAE business and strategy at a shares and stock broker firm said the election results are unlikely to have an immediate significant impact on India’s equity market.

Impact of election results on the market

“If the incumbent government secures a strong mandate, it is likely to maintain the current bull run by ensuring political stability, which investors typically favour. Stability fosters a predictable policy environment, encouraging businesses to invest for the long term,” said the broker.

For investors, market analysts suggest using the dips as an opportunity to get a further allocation in the equity at key markets.

A head of research at a wealth management firm said that the equity market remained volatile with a downward bias all through the week, trying to factor in the likely outcomes of the election results.

“While the economic fundamentals remain robust, with the secular uptrend remaining quite intact, the fact that the market has become relatively more expensive in the recent past could result in some profit booking,” he said.

According to market experts, the bulls will trigger a big rally in the market on June 3 and large-caps in financials, capital goods, automobiles, and telecom are likely to lead the rally.

(This story was taken from syndicated feed and is only edited for style by Gujarat Samachar Digital staff)