Stock Market Trends Following LokSabha Elections: Insights from History

5 June, 2024
Summary :

Historical data indicates that Indian stock markets have typically risen in the six months following LokSabha election results, regardless of the outcome. Past elections in 2004, 2009, 2014, and 2019 saw gains in the benchmark indices SENSEX and NIFTY, with increases ranging from 5% to 36%. Key factors influencing post-election market performance include policy reforms, RBI policies, the Union Budget, and global economic conditions. As a result, investors remain cautiously optimistic for 2024.

Stock Market Trends Following LokSabha Elections

However, offering some reassurance to nervous investors, historical data indicates that stock markets have typically rebounded in the six months following the announcement of LokSabha poll results. This trend has been observed in the last four general elections, regardless of the election outcomes.

Here's a look at the market performance in the six months after the LokSabha poll results in the last four elections.

LokSabha Elections 2004

The election results were announced on May 13, 2004, leading to the UPA Alliance coming into power. On the day of the results, SENSEX and NIFTY both experienced gains, with SENSEX closing at 5,399.47 and NIFTY at 1,717.5, marking an increase of up to 0.77%.

In the six months following the election results, both indices continued to rise. By November 2004, SENSEX had surged approximately 15%, reaching a record high of 6,200, while NIFTY climbed by 10%, scaling the 1,900 level.

LokSabha Elections 2009

On May 16, 2009, the UPA government, led by Prime Minister Manmohan Singh, was re-elected. Following the announcement of the results, SENSEX surged by 2.53%, while NIFTY soared by 17.74%.

In the subsequent six months, SENSEX rose from 12,173.42 to approximately 16,600 by the end of November 2009, marking a gain of around 36%. During the same period, NIFTY increased by about 15%, reaching the 5,000 level for the first time by the end of November.

LokSabha Elections 2014

The BJP-led NDA government came to power on May 16, 2014. Following the election results, SENSEX gained around 1%, and NIFTY rose by 1.12%.

Over the next six months, SENSEX climbed from 24,121.74 in May to 28,693.99 by the end of November, representing a rise of around 20%. Similarly, NIFTY increased by approximately 17%, moving from 7,203 on May 16 to 8,494 by the end of November.

LokSabha Elections 2019

In 2019, the BJP-led NDA government retained power. On the day of the election results, SENSEX and NIFTY dropped by up to 0.80%. This correction followed a sharp rally of over 3% in response to exit polls predicting the return of the Modi government.

In the following months up to November, the benchmark indices gained up to 5%, marking their weakest post-election six-month performance in the past four elections.

During this period, SENSEX rose from 38,811.39 to 40,575.17, while NIFTY decreased slightly from 12,073.75 to 11,657.05.

According to market observers, following the LokSabha poll results, investor attention will shift to other significant factors such as policy reforms, RBI policies, inflation, and government expenditure.

A key event for the stock markets will be the Union Budget, which the new government is set to present in July. Investors will be looking for signs of macroeconomic stability, policy continuity, and additional structural reforms in the Union Budget. These elements could positively impact market sentiment.

In addition to domestic factors, global influences such as inflation, crude oil prices, FII inflows, the US Federal Reserve's interest rate decisions, and US bond yields will also play a crucial role in shaping Indian stock markets over the next six months.

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Disclaimer: The recommendations, suggestions, views, and opinions expressed by experts are their own and do not reflect the views of RR Finance.

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