Mumbai: With exit polls forecasting a decisive victory for the Bharatiya Janata Party (BJP) in the Lok Sabha elections, markets are expected to experience a bullish rally starting Monday, coinciding with the week of poll results.
Market analysts indicate that the exit polls have alleviated election-related uncertainties that have been affecting the markets over the past month.
Throughout the seven phases of voting, which concluded on Saturday, market volatility was evident.
Historically, during the last five general elections, the Sensex has yielded negative returns on the day of vote counting in 1999, 2004, and 2019, with declines of 0.24%, 11.10%, and 0.76%, respectively. Conversely, in 2009 and 2014, the Sensex registered positive returns of 17.70% and 0.90%, respectively.
One month post-election results, the Sensex recorded positive returns of 22.20% in 2009, 4.59% in 2014, and 0.99% in 2019. However, in 1999 and 2004, it experienced negative returns of 2.11% and 10.50%, respectively.
Six months after the election results, the market consistently delivered positive returns in all five instances. Specifically, the Sensex achieved returns of 7.56% in 1999, 9.82% in 2004, 35.05% in 2009, 15.71% in 2014, and 4.27% in 2019.
Tanvi Kanchan, Head of UAE Business and Strategy at Anand Rathi Shares and Stock Brokers, stated that the election results are not anticipated to have an immediate significant impact on India’s equity market.
“If the incumbent government secures a strong mandate, it is likely to sustain the current bull run by ensuring political stability, which is typically favored by investors. Stability fosters a predictable policy environment, encouraging long-term business investments,” Kanchan explained.
Market analysts advise investors to utilize market dips as an opportunity to increase their equity allocations in key markets.
Joseph Thomas, Head of Research at Emkay Wealth Management, noted that the equity market exhibited volatility with a downward bias throughout the week, factoring in potential election outcomes.
“While the economic fundamentals remain robust, with the secular uptrend intact, the recent increase in market valuations may prompt some profit-taking,” Thomas said.
Experts predict a significant market rally led by large-cap stocks in financials, capital goods, automobiles, and telecom sectors on Monday.
