General Elections Impact on Markets

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eneral elections provide the elected party and authorities for the country. The elected party is held responsible for shaping policies and other required economic decisions for the country. Elections leave an impact on stock markets as the decisions made by the elected part affect stock prices and the growth. Hence, elections are essential and need to be considered for the stock markets.

Investors often look for indicators or index for the future in the pre-election period, based on the past actions of the government and market conditions. Therefore, they start investing in the best possible stocks which leads to driving the prices in the future.

It is known that reforms and plans of government affect the market conditions and hence stock markets are linked to elections. It was also seen in recent Karnataka elections when market was unable to reach high after BJP faced minority and there were changes in the current market conditions.

2019 elections may bring the same scenario or oppose as pertaining to the results that whether BJP will continue or no. It is inevitably true that BJP government came up with many changes and regulations, such as GST, Demonetisation, and export policies to encourage small business. Hence, these changes have led to positive or negative impacts on the market, further changes are to be looked forward by the investors.

Sensex and its performance

 

Election Year Sensex Year Preceding Election Year Sensex Growth
Oct-1999 4444.56 Oct-1998 2812.49 58.03%
May-2004 4759.62 May-2003 3180.75 49.64%
May-2009 14625.25 May-2008 16415.57 -10.91%
May-2014 24217.34 May-2013 19760.3 22.56%

The above table demonstrates the Sensex performance post and pre-election period to understand impact of elections on the stock market in a broader perspective. It shows the market changes in both the periods and as it is clearly known by the table that 3 out of 4 times market has rallied in the post-election period. The market has overgone positive impact in the post-election period and hence one can expect the changes after the 2019 election as well. The general election’s impact on markets is crucial for investors who plan to invest for longer duration and hence must consider these changes and historical data while investing.

2019 elections and its impact on markets

General election 2019 is crucial for the investors who invest in stock markets. As discussed above, stock markets have mostly experienced positive change after elections due to strong economic reforms and government. This was also seen in elections 1991 when markets soared by 200% because of stable economic reforms and budgets. The elections always leave an impact on stock markets in the short run but it is the government and its decisions that form and impact the long term markets.

Also, the Indian market has acquired five instances out of eight a year prior to General Elections held since 1989. Before the general election of 2009, market experiences a fall of 4869 points, since economy faced global financial crisis.

BJP government has proved to be taken some great economic decisions during its tenure of 5 years. The regulation of tax reforms GST, demonetization, and export policies were the major changes implemented by BJP government. These changes have led to many buying opportunities in the markets.

Election 2019 may lead to improvements in the market due to firm economic decisions whereas may bring volatility in the markets. Investors may start betting on the sectors which face progressive government policies. If BJH comes again, hen it may be positive sign for investors, however, if not then markets may experience changes soon.

The beginning of 2019 may bring ups and downs ahead. Any positive news in the global economy may bring positive changes in the stock market and vice versa. Short term investors may want to keep a close eye on any news pertaining to elections and its related events and news as elections tend to affect short term markets initially. On the contrary. Long term investors should focus on fundamental analysis by analyzing external and internal factors’ impact on the market conditions. According to the reports, BJP will continue with its throne and hence most likely economic decisions and reforms are to bring a positive impact on the stock markets in 2019. Additionally, IT stocks are expected to face a negative impact due to the introduction of Artificial Intelligence by Indian IT conglomerates. On the other hand, positive changes will be seen by stocks from domestic paper, cable and textile sectors. Government huge plans for improvements in railway and infrastructure are also expected to bring huge changes in the economy and hence stock markets.

 

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