As the nation gears up for the much-anticipated General Elections in 2024, market analysts are closely observing historical trends to decipher potential outcomes for the Indian stock market.
A comprehensive study examining the performance of benchmark indices, including the Sensex and Nifty 50, in the four previous election years (excluding 1999) reveals intriguing patterns.
Pre-Election Trends
The analysis of the run-up to the election results demonstrates that, irrespective of the pre-election scenarios, the Sensex and Nifty 50 consistently delivered positive returns post-elections. Banking, Consumer Durables, and Information Technology emerged as the top-performing sectors after the election outcomes.
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In 2004, an exception occurred, with both indices experiencing negative returns ahead of the results. However, in 2009, 2014, and 2019, the Sensex and Nifty 50 provided positive returns, with the most substantial gain observed in 2009, where both indices surged by 26% and 24%, respectively, before the election results were announced.
Post-Election Performance
In all four instances, the Sensex and Nifty 50 exhibited positive returns from the day following the election results until the end of the respective calendar years.
Despite a 20% crash two days after the 2004 election results, subsequent developments, including the appointment of Manmohan Singh as Prime Minister, contributed to market confidence, leading to positive returns for the rest of the year.
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The standout year was 2009, where the Sensex and Nifty 50 soared over 40% each from May 18 (the first trading day after election results) to December 31, 2009. Euphoria surrounded the UPA’s ability to form a government independently, coupled with significant foreign money inflows following quantitative easing in the US.
However, the market’s performance in the last election year, 2019, was comparatively subdued, with indices reflecting gains in the range of 4-5%. Global market struggles, stemming from the US-China trade war and ongoing rate hikes by the US Federal Reserve, contributed to underperformance in Indian markets, attributed to weak economic growth.
Market participants remain attentive to these historical patterns as the 2024 General Elections approach, seeking insights into potential market movements and responses to the election outcomes.
