The Big Picture: Lok Sabha Elections 2024 and its Ramifications on Stock Market
Lok Sabha Elections 2024
India is awaiting to witness its 78 days world’s largest Lok Sabha Elections 2024 in terms of no. of voters. The Lok Sabha elections 2024 is planned to be conducted in 7 phases (from April 19, 2024 – June 1, 2024 ) with over 97 crores registered voters.
Lok Sabha Elections and Indian Stock Market
Generally, elections play a crucial role in the performance of a country’s stock market and economy. The whole country would face the impact of these elections in terms of changes in government policies, monetary policies, economic conditions, priorities to sectors for development, regulatory changes etc…
While observing the performance of the Indian Stock Market during elections certain observations can be arrived at.
|
Year |
Government Policies |
Effect on Indian Stock Market |
|
1982 - 1984 |
Congress government led by PM Indira Gandhi and later her death. Bofors Scandal (1987) |
Increase in volatility of the stock market and Indian economy. |
|
1989 |
Coalition government led by PM Rajiv Gandhi (Congress) Anti-corruption policies with reforms |
Increase in volatility of the stock market and Indian economy. |
|
1991 |
Assassination of PM Rajiv Gandhi |
Worsened market conditions |
|
1991 -1995 |
Congress government led by Prime Minister PV Narasimha Rao and Finance Minister Manmohan Singh Implemented reforms and introduced LPG policy (Liberalization, Privatization and Globalization) |
Attracted FDI and FII. Increased investors’ confidence. Stimulated economic and stock market growth. |
|
1996 -1998 |
Coalition government with changes in three prime ministers ( BJP and United Front) Asian Financial Crises |
Adverse effects on the Indian economy and stock market conditions worsened. Indian Rupee value depreciated. Reduced Investors’ Confidence
|
|
1999 -2004 |
NDA government led by PM Atal Bihari Vajpayee Reforms in fiscal economy, sectoral liberalization, infrastructure development. |
Stability in the Stock Market and economy. GDP reached 6% -7% Increased FDI |
|
2001 |
September 11 attack |
Increase in Inflation. GDP growth declined. Market conditions worsened globally. Domestic growth fell by 50% |
|
2004-2009 |
Change in government from NDA to Congress |
Stock Market fluctuated and made a loss of 15% initially. But after 2004, the stock market took a bullish uptrend with GDP growth to 8% and FDI of USD 34 billion by 2007. |
|
2008 |
Global Financial Crisis |
Market conditions worsened and regained momentum in 2009. |
|
2009 |
The Congress government continues to rule. Corruption scandals and scams |
Domestic market conditions worsened. Reduced FDI Uncontrolled inflation and fiscal deficit. |
|
2014 |
BJP government led by PM Narendra Modi |
Regained investors’ confidence Stock market became stable. |
|
Investors started tracking political developments with its potential impact on the Indian economy. Noted a significant correlation between stock market and political scenario. Every news and announcements related to Election had its impact on the stock market performance |
||
|
2019 - 2023 |
The BJP government continues to rule, led by PM Narendra Modi. Economic reforms, policy continuity, Government initiative , infrastructure development, tax reforms, demonetization reforms and GST Global factors like US economic policy, global trade tensions, war scenarios etc… |
It had a positive impact on the stock market due to the continuation of the ruling party. Increased FDI Although there were periods of volatility , the stock market managed to perform positively. |
Stock market is influenced by various global and domestic factors. This Lok Sabha Elections 2024 and government policies would definitely have a significant impact on the stock market. Investors consider these Lok Sabha elections 2024 as one of the factors which influences the stock market conditions.
Performance of Stock Indices during Elections
|
Election Period |
Sensex |
Nifty |
||||
|
Before Three Months of Election |
After three months of election |
Change in Sensex |
Before Three Months of Election |
After Three months of election |
Change in Nifty |
|
|
05.09.1999 - 03.10.1999 |
4141 |
5005 |
864 |
1054 |
1592 |
538 |
|
20.04.2004 - 10.05.2004 |
5591 |
5192 |
-399 |
1893 |
1652 |
-241 |
|
16.04.2009 - 13.05.2009 |
9709 |
15667 |
5958 |
2828 |
4605 |
1777 |
|
07.04.2014 -12.05.2014 |
22386 |
26638 |
4252 |
6162 |
7727 |
1565 |
|
11.04.2019 -19.05.2019 |
38673 |
37332 |
-1341 |
10794 |
11053 |
259 |
It is observed that the three month period before and after the election has always been with a significant uptrend in the stock market in most cases when the ruling party continues to win. But when there is a change in government , the stock market displays a downtrend for a short-term period.
Predictions on Indian Stock Market based on Lok Sabha Elections 2024
The outcome of Lok Sabha Elections 2024 is highly impacted by the market volatility, flow of news to the public, sentiment changes among the voters and poll survey results.
FMCG & Automobile Sector
Political parties’ expenditure would generally increase during general elections 2024. This increase in spendings would inject liquidity into rural India for the purpose of gaining rural votes. This in turn would significantly boost rural consumption demand which is currently sluggish due to certain factors like subpar monsoons, low agricultural commodity prices, high inflation and El Nino effect.
This boost in rural consumption demand would lead to the better performance of FMCG sectors, increased Tractor sales in automobiles and agriculture equipment manufacturing industries. Thus, these segments might remain on investors watch list.
Chemical Sector
If the government announces any subsidy for fertilizers keeping in view the large agriculture base of the country, this would boost agrochemical segments.
Tourism Industry
Also, the travel industry is also expected to get boosted when a large population travels back to their native place for Lok Sabha Elections 2024. This period also coincides with summer vacation which in turn boosts tourism .
Media Segment
Media segment gets a high boost and huge revenue during this Lok Sabha Elections 2024 period since political parties utilize the media for reaching out to the whole country. Companies that operate on event management, print and digital media campaigns are also expected to get good returns in the midst of Lok Sabha elections 2024.
Energy Sectors
Interim budget has proposed to provide 300 units of electricity for 1 crore households every month through solar power panels.
Manufacturing
The focus to strengthen the electric vehicle segment would boost manufacturing and charging infrastructure
Healthcare
The Indian pharma industry is aspiring to reach the milestone of USD 130 billion by 2030 as part of vision India@100.
Also, the health sector focuses on value driven research and global supply chain integration .
Banking
The banking sector has entered a positive credit score cycle, leading to increase in business growth and providing funds to leverage business operations expenses.
Infrastructure
Government initiatives to boost infrastructure sectors (roads, railways, ports and highways )are increasing expectations on the potential growth of the sector.
Impact of Lok Sabha elections 2024 on Indian economy and stock market
Currently the Indian stock market is trading at all time highs. If the current government continues, the stock market might remain stable since there would be continuity in implementation of the policies made by the government. It is expected that the Nifty would reach the 23400 points mark by mid-2024 and Sensex would reach 76000 points mark.
The current economic condition indicates strong domestic growth with total demat account holders about 13.93 crores which has increased by 28.6% on YoY basis. Whereas, the mutual fund’s AUM has grown to Rs.54.5 lakh crore as of 29th February,2024. These conditions have supported the well performance of the Indian stock market till date.
Conclusion
Though the Lok Sabha Elections 2024 impacts the stock market volatility. This impact would be for a short time period. However, the government policy actions and ability of the government to create a conducive business environment will post a long-term effect on the stock market.
The pre-election rallies in stock market indices are always normalized due to high expectation of the upcoming Lok Sabha elections 2024 by investors. Such uptrend rallies were observed in the last five election periods.
The forthcoming Lok Sabha elections 2024 provides immense opportunities for the investors to create wealth from a short to midterm period.
Investors can utilize every 10% change in the market volatility as a buying opportunity. Investors are advised to invest in a diversified portfolio. Utilize the best stock trading app for beginners in India by Enrich Money which is available with zero AMC charges.
Frequently Asked Questions
What are the dates for the Lok Sabha elections in India in 2024?
The forthcoming Lok Sabha elections 2024 has been scheduled to be conducted in a 7-phase manner starting from April 19th 2024 to 1st June,2024
Will the stock exchanges operate on polling dates in Mumbai?
It is widely expected that there will be a trading holiday on May 20, 2024, due to the polling day in Mumbai.
How do Lok Sabha elections in 2024 affect the Indian stock market?
Lok Sabha elections can impact the stock market due to the potential changes in government policies and economic reforms proposed by different political parties. Investors often closely watch election outcomes for indications of future economic trends and policy directions, which can influence market sentiment and stock prices.
What are some historical trends of the Indian stock market during Lok Sabha elections?
Historically, the Indian stock market has shown mixed reactions during Lok Sabha elections. While some elections have been followed by market rallies, others have seen temporary dips or increased volatility. Factors such as the political landscape, economic conditions, and global trends also play a significant role in determining market movements during elections.
How should investors prepare for potential market fluctuations during the 2024 Lok Sabha elections?
Investors should focus on maintaining a diversified portfolio to mitigate risks associated with market fluctuations. It's also essential to stay informed about election-related developments and their potential impact on the economy and specific sectors. Consulting with financial advisors and monitoring market trends can help investors make informed decisions during this period.
Disclaimer: This blog is dedicated exclusively for educational purposes. Please note that the securities and investments mentioned here are provided for informative purposes only and should not be construed as recommendations. Kindly ensure thorough research prior to making any investment decisions. Participation in the securities market carries inherent risks, and it's important to carefully review all associated documents before committing to investments. Please be aware that the attainment of investment objectives is not guaranteed. It's important to note that the past performance of securities and instruments does not reliably predict future performance.
