Stock market trends after Lok Sabha elections: What history tells us

Stock markets saw heavy correction on Tuesday, May 4, amid the counting of the votes of Lok Sabha polls. A sharp fall of over more than 4% in benchmark equity indices, SENSEX and NIFTY, left people speculating about the future course of the stock markets.

Offering some relief to jittery investors amid the weaker-than-expected performance of the BJP-led NDA alliance in the Lok Sabha polls, past data shows that stock markets have gained in six months after the poll results in the last four general elections irrespective of the outcome.

Here is a glimpse of what happened in six months after Lok Sabha poll results in the last four elections.

Lok Sabha elections 2004

The election results were declared on May 13, 2004, bringing the UPA Alliance to power. SENSEX and NIFTY gained up to 0.77% on the results day. SENSEX closed at 5,399.47 and NIFTY at 1,717.5 on May 13.

In the next six months till November 2004, SENSEX gained around 15% while NIFTY soared by 10%. NIFTY scaled 1900 level while SENSEX hit record high of 6,200 levels in the six months after the Lok Sabha election results.

Lok Sabha elections 2009

The UPA government under Prime Minister Manmohan Singh’s leadership returned to power on May 16, 2009. SENSEX jumped 2.53% while NIFTY soared by 17.74% after the poll results.

In the next six months SENSEX moved from 12,173.42 to 16,600 level by November end in 2009, gaining around 36%. NIFTY moved up around 15% to scale 5,000 levels for the first time by November end.

Lok Sabha elections 2014

The BJP-led NDA government came to power on May 16, 2014. SENSEX gained around 1% while NIFTY rose by 1.12% after election results.

In the next six months till November, SENSEX moved up from 24,121.74 in May to 28,693.99 by November ended, rising by around 20%. NIFTY also rose by around 17% in six months after the poll results. It moved from 7,203 on May 16 to 8,494 by November end.

Lok Sabha elections 2019

The BJP-led NDA government retained power in 2019. SENSEX and NIFTY dropped up to 0.80% on the poll results day. However, the correction was after a sharp over 3% rally on exit polls predicting the return of the Modi government.

In the next months to November, benchmark indices gained up to 5%, logging their weakest returns in six months after polls in past four elections.

SENSEX moved from 38,811.39 to 40,575.17 by November end while NIFTY rose from 12,073.75 to 11,657.05 in 2019.

Lok Sabha Elections 2024 results: Key triggers to keep a watch in next six months

Experts say that stock markets have mostly priced in a majority for the BJP-led NDA coalition in 2024 elections and the stock markets scaled record levels after the exit polls.

However, after the early trends not indicating a clean sweep for BJP-led NDA as projected in exit polls, the investors have taken a cautious approach and the market sentiment may remain subdued for the next few weeks.

According to market observers, the investor focus will return to other major factors such as policy reforms, RBI policy, inflation and expenditure, after a clear picture of the Lok Sabha polls results emerge.

The Union Budget to be presented in July by the new government will be the major event for the stock markets. Investors will look for macroeconomic stability, policy continuity, and further structural reforms in the Union Budget. These factors could boost the market sentiment.

In addition to local factors, global influences such as inflation, crude oil prices, FII inflows, US Fed interest rate decision and US bond yields would also influence Indian stock markets in the next six months.

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