1 Month To Go For Elections 2024: How Sensex Has Historically Performed In Recent Elections Years?

Just a month is left for the nation to begin voting for Lok Sabha Elections 2024 from April 19th.The results will be declared on June 4th, when the nation will know whether PM Modi led BJP govt will continue to remain in power or not.

While all that remains to be seen in the coming months, what about the elections¡¯ impact on India¡¯s stock market? How will Sensex and Nifty50 be affected before, during and after elections? Let us look back at how India¡¯s stock market has historically performed in recent election years. This can give us a glimpse into what to expect in near future.

How Stock Market Has Historically Performed In Recent Elections Years?

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As per TheHinduBusinessLine report,the last four election years are taken into consideration-2019, 2014,2009 and 2004, wherein the results were out in the usual month of May.

This study has been divided into two sections. First, the performance of the sectoral indices and benchmark indices, the Sensex, Nifty 50, and others, up to the day before the election results were declared. Next, the stock market's performance after the election results for the remainder of the year.

Pre-election performance

The only year that the Sensex and Nifty 50 finished lower than expected before the election results was 2004. The results of the election were declared on May 13, 2004. As of May 12, 2004, the Nifty 50 and Sensex were down 9% and 8%, respectively, year-to-date.

With the exception of 2004, the Sensex and Nifty 50 had positive returns in 2009, 2014, and 2019. The Sensex was up 26% and the Nifty 50 was up 24% as of May 15, 2009, the day before the election results were declared, making 2009 the best of the three.

This outperformance throughout that time was facilitated by the rebound from the 2008 Great Financial Crisis (GFC) low points. Before the results, the indices had increased by 8% and 12%, respectively, in 2014 and 2019.

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Also Read: Nifty v/s Sensex: How The Two Stock Market Indices Differ From Each Other

Post-election performance

In all four of the previous election years' cases, starting on the day following the announcement of election results and continuing through the remainder of that specific calendar year, Sensex and Nifty 50 have produced positive returns.

Indeed, two days following the 2004 election results, the benchmark indices fell by roughly 20%. The markets were startled by the National Democratic Alliance's unexpected defeat. The CPI leader Sitaram Yechury's remarks, which were perceived as a reversal of the NDA's reforms and which the UPA needed in order to form a government, that the Disinvestment Ministry would need to be wound up, particularly alarmed markets a day after the results. Naturally, this was undone after Manmohan Singh was appointed prime minister and investors started to feel more confident, as per the report.

However, 2009 is still at the top of the list. The first trading day following election results, May 18, 2009, saw Sensex and Nifty 50 rise by more than 40% apiece in 2009. When it became evident that the UPA could form a government independently and reach the upper circuit on May 18, markets went into a frenzy. Following the US's quantitative easing program, substantial inflows of foreign capital into India propelled the country's stock markets throughout the remainder of the year. 2009 saw an incredible $15 billion in inflows into the Indian equity segment starting the day after the election results.

Out of the four election years, 2019 was the slowest, with the benchmark indices rising by 4-5 percent. The US-China trade war and the ongoing rate hikes by the US Federal Reserve affected the stock markets in 2019, making it difficult for the world markets to rebound from the 2018 crash. Due to sluggish economic growth, Indian markets performed poorly.

Which Sectors Have Performed Good In Election Years?

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The banking, information technology, and consumer durables sectors consistently rank among the top five after elections, regardless of the trend that existed prior to the election. In fact, in the time leading up to the election results, the banking industry had been in the top five three of the last four times. For the time leading up to the election results, the IT and consumer durables sectors were in the top five in two of the election years.

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