Election 2019 And Indian Stock Market: History, Relation, And Impacts

Rakesh Jhunjhunwala Tips & Portfolio

General Election 2019 is the thing now every investor is waiting for. But why the elections are considered to be much more important for stock markets. Why every tom, dick and harry associated with the stock market is saying election 2019 as a key trigger for the markets? Come on lets explore the facts behind this and see where the markets are expected to head ahead.

1.Relation Between Election And Stock Market

General election results decide the apex authorities for the country. The elected party will be responsible for the policy formulation and other economic decisions for the country. These decisions directly related to the stock prices, as the favourable policies lead to industry growth and vice versa. Therefore elections are considered to be crucial for the stock markets.

In the pre-election period generally the government's past actions and election manifesto considered to be the indicators for the future. Therefore, if investors find government optimistic on certain sectors then they start betting on the best possible stocks among that industry or sector, which further drives their prices.

On the basic level for everyone, the anticipated reforms and plans of the government drives the market sentiments. This is the only relation between the stock market and the general election. Upcoming election 2019 is a litmus test of BJP government. The biggest regulatory changes, tax reforms GST, Demonetisation have been carried by this government. Moreover, the export policies and other policies to boost small businesses are the key takeaways in the last 5 years.

The biggest rating agencies like Moody's as well as firms like Morgan Stanley are optimistic about Indias growth which is positive for the stock markets. Looking at the recent correction its a bit confusing that where would market lead. Analysis of historical numbers can derive this relation well.

2.Sensex, Elections And Performance

To analyze the facts behind the election rally, we have analyzed the Sensex prices for the last 4 elections. We have also considered the year preceding to the election year to see the exact impact of the Sensex in pre and post-election period.

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 shows the swings of the market. It can be clearly seen that 3 out of 4 times market have rallied in the post-election phase. So it can be generally said that election does rally stock markets. The above table shows the history, which showing us a positive sign for the markets in the upcoming period. The election period is near now and one can easily expect the rally with this historical numbers. The rally would be a short run rally where short term buying and selling could be beneficial. To know stocks to buy for short term read Best Shares To Buy For Short Term Today. But if you are long-term investor then you should analyze election impacts well. Lets shed some light on the possible impact of the 2019 general elections on the stock market.

3.Election 2019 And Its Impacts On Indian Stock Markets

General Election 2019 are not only important for BJP but also for all the stock market investor. The history shows that stock markets have always favoured with the stable government and good economic reforms. The best example for this is the market movements in 1991. In the election year (1991) markets, have shot up almost by 200% due to the good economic reforms and strong budgets. The same thing can be observed in 1999 which is a technological boom era where stock markets have appreciated very well. Its not only the election which drives the stock market rally at the same time the decisions made by the government are also important. This makes us crystal clear that elections have the material impact on the stock markets in the short run. But in the longer term, the decisions of the government and the economic growth matters more.

BJP government have made some great economic decision during last 5 years. The changes like GST implementation, Demonetisation, export pushing policies are some of the great examples among them. These changes have sideways effects on various communities and businesses. Some classes see these changes as good and some portray it as bad. However, with the market perspective, these changes have created many buying opportunities in the market. And also offered boom to the sectors like logistics, manufacturing etc. On the back of this markets have witnessed a huge rally in the year 2017 which was considered as the greatest one. The markets have reached to its all-time highs.Post that from Feb-2018 markets corrected with the weak global factors.

Election 2019 can bring a volatility in the markets, however, the strong economic growth can offset this. If the election results come in the favour of BJP then it may turn a big positive. The investors would start betting on the sectors where progressive government policies would be pointing out. IT, pharma industries as well as textile and paper industries are some of the key beneficiaries of last year. And if the government changes then the market may see another crash soon.

4.Stock Market In 2019

The beginning of the year 2019 would be news driven for the markets. You may see the huge ups and downs ahead. Any positive news in the global economy or the individual sector or stock can turn it markets green and vice versa. So short-term investors need to be on toes during this period. In an upcoming election year, short-term investors have to keep a close watch on the market news, sector news and upcoming events in the market.

On the other hand, the long-term investor needs to analyze the impacts of all the external and internal factors like news, fundamentals etc. According to the market pundits, BJPs reign is likely to continue in the upcoming election too. The strong growth rate and stable economic policies would be the key positives in that case for the stock market in 2019.

On the sectoral level, In 2019 stock markets are expected to see a boom in the IT stocks due to the implementation of Artificial Intelligence (AI) by Indian IT conglomerates. Moreover, stocks from domestic paper, cable and textile sectors are expected to benefit. Governments optimistic plans for infrastructure and railways would be the key aspects to watch. Many investors are waiting for the election results to get a proper insight into these sectors. To know the drivers of the favourable sectors in 2019, Read Best Stocks To Buy For Long Term Investing.

5.What Should Be Your Strategy

The election 2019 is directly mapped to the growth story of the country. Even though markets are expected to boom ahead of election 2019, the election result can turn this situation. In the current situation where markets have corrected one need to have crystal clear strategy for investing.

To formulate the strategy for investing in this situation one needs to take a dig of fundamental as well as news analysis. To carry this analysis, years of experience and expertise is advised. In the choppy market situation where there are many multibaggers are at discounted price doing it on own could be a lethal proposition. Investors should take professional help during this tenure to grab the best possible opportunities from the markets. In the stock markets, professional advice is a synonym for the stock advisor. A Sebi registered stock advisor all you need to maximize your investment returns in the longer run. It is a difficult task to find the best and an authentic one, however, we made it simple for you with 10 steps. To shortlist the best stock advisor from the huge list of available stock advisors read Shortlist The Best Stock Advisory Company In 10 Steps.

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