Navigating Market Trends: Before & After Elections

Source: istockphoto

 

As India gears up for the upcoming elections, we have taken some time to analyse the market around the election time. The historical performance outlined in the table below sheds light on the market's behaviour pre & post elections. We have considered the NIFTY 50 index to analyse market behaviour using the market price on the month of the election as the baseline.

Below table shows the pre and post NIFTY 50 returns for periods during the past 5 elections:

The past one year return outlined in the yellow block represents the performance from May 2023 till date (15th Jan, 2024).

Atal Bihari Vajpayee Era (Oct1999-May2004): The market witnessed substantial gains in the year preceding the election. However, the immediate post election period saw a decline, which was largely influenced by the burst of the dot-com bubble in 2000 which continued till April 2003, leading to significant market correction.

Dr. Manmohan Singh's Tenure (May2004 and May2009 till May2014): Both the terms saw positive market returns in the first year, with the second and third years showcasing remarkable growth. However, in the year preceding the second subsequent election, there was a notable downturn due to the 2008 financial crisis triggered by the collapse of Lehman Brothers and the subsequent bankruptcy of financial institutions exposed to mortgage-backed securities in the US which affected the Indian market. Followed by which the market again moved significantly upward.

Narendra Modi's Era (May-14 and May-19 till May2024): The market witnessed a bullish trend during the term of Modi. However, in the year after his second term, the market faced a downturn due to the global impact of the COVID-19 pandemic. Despite the initial setback, the market rebounded strongly and is currently displaying a bullish trend.

As we delve into the historical market performances around election periods, it's crucial to acknowledge the uncertainties that accompany such analyses. The returns of the past years, while informative, are not indicative of future trends. As India braces for the upcoming elections, it's essential for investors to approach these analyses with caution.

Past patterns might guide, but they do not guarantee future outcomes.

 

Note by - Pragya Patni

Future Corp Capital

January 2024

 

Disclaimer: The data/information compilation in this article is the Author’s comment on general trends in the securities market and discussions of broad-based indices. The information/data provided here is not a research report as defined under the Securities and Exchange Board of India (Research Analysts) Regulations, 2014 (SEBI RA Regulation, 2014). Thus, the Author is not required to have registration as a Research Analyst under the SEBI RA Regulation, 2014.

The information/data provided in this article is from publicly available data, and appropriate references have been given, which we believe are reliable. While reasonable endeavours have been made to present reliable data related to current and historical information, the Author does not guarantee the accuracy or completeness of the data/ information in this article. Accordingly, the Author or any of his connected persons, including his associates or employees, shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information/data contained, views and opinions expressed in this article.

The information/data provided in the article is purely for information purposes and to disseminate knowledge on the general trends in the securities market. The same does not constitute investment recommendation/advice or an offer or solicitation of an offer to buy/sell any securities.

No person should rely solely on the information/data in this article and must make investment decisions based on their own investment objectives, judgment, risk profile and financial position. The recipients of the article may take necessary professional advice before acting on it.

Investment in securities market are subject to market risks. Read all the related documents carefully before investing.

 

 

Source: istockphoto