Market on Election Day: Nifty, Sensex, broader indices fell post-2019 results; what to expect post-2024 verdict?

As experts have already cautioned of high volatility on the poll outcome day i.e. June 4, investors and traders must also be eyeing as to what the newly elected party will bring in for the economy at large and on the D-Street.

Talking about the most recent election in 2019, headline indices, both the Sensex and Nifty edged lower by up to 0.8 per cent on the election outcome day. And sectorally, metal and IT pack came out as the winners, with the former gaining 1.5 per cent.

Historical markets performance data on the election day

Indices               2004       2009        2014         2019
Sensex                 1            17.4            1              -0.8
Nifty 50               0.4            18              1              -0.7
Midcap 100        0.2            12              2             -0.2
Smallcap 100   0.5           9.3            2.5          -0.2
Nifty 500             -0.1           16             1.4         -0.5
Nifty Bank           -2             19              4.4         -0.4
Metal                   -0.2           18              2.5          1.5
IT                               3            12.5          -2.2          0.8
Pharma               1.4            12             -1.5         0.2
Realty                   NA            24             6.3         0.5
Auto                     -0.2           15               1             0.4

How markets fared historically post the election outcome ( after 3-months post-poll outcome)

Indices           2004       2009        2014         2019
Sensex             -5.5         21.5        10.5          -6.2
Nifty 50              -7          19.5        10.5          -7.7
Midcap 100     -7.8        37.9        18           -11.5
Smallcap 100   1.8       39          21           -18
Nifty 500            -7.2        27.3        13           -8.4
Nifty Bank          -17.6      24.8         8.5          -12  
Metal                    10.3        42.2        21           -20.5
IT                              6.4        43          12            1
Pharma               -8.5        14.7         22          -8.6
Realty                   NA        51.6         20          -8.4
Auto                      9.6         39.5        19           -15.3

How markets fared historically post the election outcome ( after 1-year post poll outcome)

Indices                2004       2009        2014         2019
Sensex              19.5       38.3        14.3         -21.6
Nifty 50              15.8       37.8        16              -23
Midcap 100      33.2     90.8         39.5            -27
Smallcap 100   76.7     79.7         30.9        -39.7
Nifty 500             23.1      48.7        22.3         -22.7
Nifty Bank          19.5      67.3        27.7        -43.4
Metal                      46       89.9        -10.6         -40.3
IT                             27.2     92.7         19.9         -11.6
Pharma                 1.7      63.8         57.3           12.8
Realty                    NA      32.2        2.5              -38.7
Auto                      13.5     98.6         37.9            -30.1

Furthermore, returns after 1-year of Lok Sabha 2019 outcome had rather been unfavourable primarily due to the corona-led market mayhem. The headline indices and Nifty 50 delivered a drawdown of up to 23 per cent, while broader indices, Nifty Midcap 100 and Nifty Smallcap 100 sank up to 40 per cent. Nifty Bank emerged as the laggard with losses of 43.4 per cent.

How experts view markets to perform post Lok Sabha elections 2024?

Global brokerage JP Morgan anticipates re-rating of Nifty valuations in case the Modi government comes to power once again and on the likely rate cut by the Reserve Bank of India. Furthermore, on the valuations re-rating it has pegged Nifty’s target at 25 per cent in the base and bull case.

Motilal Oswal Financial Services believes that with the continuity of the present government post the Lok Sabha 2024 elections, both the economy and capital markets will be stable. The domestic brokerage is overweight on sectors, including financials, consumption, industrials, and real estate. Furthermore, as investment themes it likes industrials, consumer Discretionary, real estate, and PSU Banks.

Ambareesh Baliga, Independent market analyst is of the view that a stable growth-oriented government is a huge positive for the markets but the markets had discounted this government coming back – the only question was the size of the victory. Thus the sustainability of the gap up needs to be gauged, he added.

Mr Atul Parakh, CEO of Bigul is of the view that while exit polls drove Nifty to an all-time high today, the true litmus test lies in the imminent election results, which are anticipated to be the primary driver of market sentiment in the immediate aftermath. From a longer term perspective, the myriad of factors, including structural economic reforms, fiscal policies, global market dynamics, and corporate earnings growth will shape up the market trajectory.

Therefore, while short-term fluctuations are expected, prudent investors are advised to maintain a cautious stance, emphasising rigorous fundamental analysis and strategic diversification to navigate through potential market turbulence and capitalise on long-term opportunities, added Parakh.