How will the narrow victory for the NDA influence the Indian stock market? What will be the thought process of foreign investors on the investment opportunities and will they be investing more than they did in 2024? Well to answer these questions, let us take a deep dive so as to know what really happened!
The forecast which was there for the Lok Sabha elections 2024 does not really aligns with the results. However, we can see a powerful opposition making their way in to the bigger picture. This may lead to various changes in Political, social and economic aspects. Elections are responsible for uncertainty in government policies, economic priorities, reforms and sectors that may benefit or face some serious regulations .This may lead to volatility in the stock market. Investors need to be careful while making investment decisions. The business aspect of this major shift can be seen post-election results as the Indian market saw a shift of 6 percent on June 4 which later was recovered over 3 percent.
The common thing between the Government and the stock market is that it is ever changing. The changes that have been observed in this election are definitely going to result in more consensus based decision making which will dilute the business environment, this is going to increase the data transparency and trust among the public. Some Critical features of the incident are :
Elections offer both opportunities and threats to investors. Making wise investment selection may require having a thorough understanding of how election result may affect the stock market which will eventually help investors make informed decisions. Investment diversification can assist in reducing the risks brought on by political unpredictability .investor can lessen the impact of unfavorable market moves associated to elections by diversifying their holdings across a range of asset classes and industries. The intricate interaction of political, economic and psychological elements determines the relationship between elections and stocks market. Elections can bring uncertainty and volatility, but they also provide shrewd investors the chance to profit from changes in the market. Investors may better manage the financial landscape in these politically sensitive times by knowing historical trends, investor behavior and the wider ramifications of election outcome.
Market optimism was seen across industry for instance ,Banks stocks were up in both private sector bank with +4.53% and public sector banks with +2.88%.Auto sector doing better with +4.70%.Pharma got shot in the arm with +3.65%.IT by +2.39% and FMCG sector rose to +4.34%.
The fall in the market was not because of the elections but because of the sentiments of the public. There is no such change in the working conditions of the market but how the public felt about it. The fear is that the change in government might lead to changes in current economic policies which have been in place for a decade now. The fear is that the BJP might make a few changes now to please the voters. The last government focused on infrastructure and manufacturing, however, these projects come at a cost. The political cost with rural voters who are most likely to get displaced whenever any new factories or highways get set up. The fear that the BJP would hold down these projects led to the crashing down of the market. Analysts suggest that it neither is unlikely to derail the trajectory nor is India’s broadly stable currency and attractive debt market likely to be unduly ruffled. This has helped the market to recover and the new Prime minister is likely to take oath this Saturday. The markets are not always logical .Yesterday it was about fear, today it is more about hope.
The forecast which was there for the Lok Sabha elections 2024 does not really aligns with the results. However, we can see a powerful opposition making their way in to the bigger picture. This may lead to various changes in Political, social and economic aspects. Elections are responsible for uncertainty in government policies, economic priorities, reforms and sectors that may benefit or face some serious regulations .This may lead to volatility in the stock market. Investors need to be careful while making investment decisions. The business aspect of this major shift can be seen post-election results as the Indian market saw a shift of 6 percent on June 4 which later was recovered over 3 percent.
The common thing between the Government and the stock market is that it is ever changing. The changes that have been observed in this election are definitely going to result in more consensus based decision making which will dilute the business environment, this is going to increase the data transparency and trust among the public. Some Critical features of the incident are :
- Fractured Mandate: The forecasts were expecting the leading political party i.e. BJP led by Prime Minister Narendra Modi to once again shine and what we are actually witnessing post results does not really align with the expectations .Now that we are seeing NDA government and a strong opposition named I.N.D.I.A. This has changed the dynamics quite aggressively. This is the fractured mandate so as to say. Important economic relations involved are the concerns like –
- Census of India- The census is usually conducted once a decade, and was last published in 2011. Census has its own impact on the market in order to get the quality work done using the quality data. This is likely to happen soon with the changed narratives.
- Neutral Media Narratives- The media narratives are definitely going to change Post-election as the media which was driven by sentiments earlier may change into fundamental driven media.
- Hard to Bulldoze decisions – Several Economist have pointed out that the demonetization was not a very good decision as per the economy is concerned. Few international organizations stopped trusting on a country that demonetized its own currency.
- Market Dynamics: The trading channel of NIFTY-50 which is also called long term trading channel and the safest investment option got broken down which came below 20,000 and rose by more than 3 percent. Sensex saw a similar recovery; it ended the trading day at over 74,300 which is more than 3 percent.
- Short term panic VS long term opportunities: No one can guarantee the duration of the panic. All an investor can do is to buy the panic and keep on buying it as per the market situations.
Finding Important data : There exists 17 vital data points that have not been released in past few years when the existing government was in the power for a long time now.
Elections offer both opportunities and threats to investors. Making wise investment selection may require having a thorough understanding of how election result may affect the stock market which will eventually help investors make informed decisions. Investment diversification can assist in reducing the risks brought on by political unpredictability .investor can lessen the impact of unfavorable market moves associated to elections by diversifying their holdings across a range of asset classes and industries. The intricate interaction of political, economic and psychological elements determines the relationship between elections and stocks market. Elections can bring uncertainty and volatility, but they also provide shrewd investors the chance to profit from changes in the market. Investors may better manage the financial landscape in these politically sensitive times by knowing historical trends, investor behavior and the wider ramifications of election outcome.
Market optimism was seen across industry for instance ,Banks stocks were up in both private sector bank with +4.53% and public sector banks with +2.88%.Auto sector doing better with +4.70%.Pharma got shot in the arm with +3.65%.IT by +2.39% and FMCG sector rose to +4.34%.
The fall in the market was not because of the elections but because of the sentiments of the public. There is no such change in the working conditions of the market but how the public felt about it. The fear is that the change in government might lead to changes in current economic policies which have been in place for a decade now. The fear is that the BJP might make a few changes now to please the voters. The last government focused on infrastructure and manufacturing, however, these projects come at a cost. The political cost with rural voters who are most likely to get displaced whenever any new factories or highways get set up. The fear that the BJP would hold down these projects led to the crashing down of the market. Analysts suggest that it neither is unlikely to derail the trajectory nor is India’s broadly stable currency and attractive debt market likely to be unduly ruffled. This has helped the market to recover and the new Prime minister is likely to take oath this Saturday. The markets are not always logical .Yesterday it was about fear, today it is more about hope.