The 2024 election results have sent ripples through the stock market, triggering a significant correction as the votes were tallied. Both SENSEX and NIFTY saw a sharp decline of over 4%, leaving investors anxious about the market’s future direction.
Despite the initial volatility, historical data offers some comfort. Past election cycles show that regardless of the outcome, the stock market has generally rebounded in the six months following the results. Here’s a look at the market’s performance post-election in the last four general elections:
2004 Lok Sabha Elections
The 2004 elections brought the UPA Alliance to power. On May 13, 2004, the announcement day, SENSEX and NIFTY saw modest gains of 0.77%. Over the following six months, SENSEX climbed approximately 15%, hitting a record high of 6,200, while NIFTY increased by 10%, reaching 1,900.
2009 Lok Sabha Elections
In 2009, the UPA government retained power under Prime Minister Manmohan Singh. The markets responded positively, with SENSEX jumping 2.53% and NIFTY soaring 17.74% on the results day. By November 2009, SENSEX had surged 36% to 16,600, and NIFTY had climbed 15% to 5,000.
2014 Lok Sabha Elections
The 2014 elections saw the BJP-led NDA government come to power. On May 16, SENSEX rose by about 1%, and NIFTY by 1.12%. Over the next six months, SENSEX increased by 20% to 28,693.99, and NIFTY grew by 17% to 8,494.
2019 Lok Sabha Elections
In 2019, the BJP-led NDA retained power. SENSEX and NIFTY initially dropped by 0.80% on results day, following a sharp rally based on exit polls. By November 2019, SENSEX had gained 5% to reach 40,575.17, and NIFTY had grown to 11,657.05.
2024 Lok Sabha Elections: What to Expect
Market experts suggest that the stock market had largely anticipated a majority for the BJP-led NDA coalition in the 2024 elections, resulting in record highs following exit polls. However, the actual results deviated from these expectations, causing investors to adopt a cautious stance. This sentiment might persist in the coming weeks.
Key factors that will influence the stock market in the next six months include:
- Policy Reforms and RBI Policies: Investors will be keenly watching for any policy changes and RBI’s stance on inflation and interest rates.
- Union Budget: Scheduled for July, the new government’s budget will be critical. Expectations include macroeconomic stability, policy continuity, and further structural reforms.
- Global Factors: International dynamics such as global inflation trends, crude oil prices, FII inflows, US Federal Reserve interest rate decisions, and US bond yields will also play significant roles.
Stocks to Watch
Given the current landscape, certain sectors and stocks may offer opportunities:
- Infrastructure and Construction: Companies in these sectors might benefit from continued government spending on infrastructure projects.
- Financials: Banks and financial institutions could see growth with anticipated policy reforms and RBI’s monetary policy stance.
- Technology: Tech firms may continue to thrive with ongoing digital transformation and innovation initiatives.
- Consumer Goods: Companies in the consumer goods sector might see steady demand, benefiting from macroeconomic stability and consumer confidence.
Conclusion
While the 2024 election results have introduced short-term volatility, historical trends and a focus on key economic indicators suggest potential growth in the stock market over the next six months. Investors should stay informed about policy changes, global economic conditions, and sector-specific opportunities to navigate the post-election landscape effectively.
