Post-election six-month returns always positive since 2004 LS polls | Stock Market Today

As is the case now, equity markets always tend to be highly volatile around the time of election results. However, they always tend to be rewarding six months down the line. Sample this: the benchmark Nifty50 index has always generated positive returns on a six-month forward basis from the election result day since 2004. The average return for the previous five election cycles is 10.2 per cent. Barring 2019, the broader market Nifty Midcap 100 and the Nifty Smallcap 100 indices too have generated positive returns six months post-elections. Even in 2004, when benchmarks had collapsed 20 per cent after the National Democratic Alliance (NDA) surprise defeat, the markets had recouped all the losses to generate positive returns six months and one year later. On Tuesday, the markets tanked 6 per cent after the Bharatiya Janata Party (BJP) failed to cross the halfway mark, stoking concerns over the effectiveness of a coalition setup. On Wednesday, the market recouped more than half of the losses. If history is to go by, election-related weakness can be a good buying opportunity.

“BJP has successfully run a coalition government from 1999-2004 and 2014-2024. Note, in the 2004 election when a Congress-led government came in with support from the left party, markets were worried about an unstable coalition. Benchmark indices hit lower levels post the result, but within six months markets had recouped all losses and staged one of the biggest bull runs up to 2007 led by strong economic momentum. Historically, the Nifty has delivered +9 per cent/+8 per cent in the 3/6 months post-general elections since 1991, showing that in the past a correction or dip has typically ended up as a buying opportunity over the longer term,” observed JP Morgan in a note.

First Published: Jun 05 2024 | 8:01 PM IST

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