The BJP promise of stocks indice setting new records after June 4: Why market trajectory during current elections are broadly in line with past trends

Between May 1 and May 10, benchmark stock market indices fell by 2.61 each, as low voter turnout (65.68 per cent) in the first three phases raised concerns among a section of market participants that the ruling Bharatiya Janata Party’s (BJP) seat count may be lower than expected. The BJP is claiming that it will win over 400 seats. Both the indices, however, gained around 2 per cent since April 19, when the first phase of election was held and May 18.

Foreign portfolio investors (FPIs) have also sold Rs 28,242 crore, or $3.38 billion of Indian equities so far in May, due to election related uncertainties. They also pulled out money from the domestic market and invested in China where valuations are cheaper compared to India. As the market fell, Finance Minister Nirmala Sitharaman and External Affairs Minister S Jaishankar tried to assure investors that the BJP will again come to power with a strong majority.

“Prime Minister Modi’s third term…one more very good stable, high governance, good governance, more governance, less government, is what we are looking forward to and we are confident that Prime Minister Modi will be forming his third term where India will become the third largest economy,” Sitharaman had said last week. Following that, Prime Minister Narendra Modi in an interview to a news channel said the stock market will set new records after June 4, the day the outcome of the seven-phase Lok Sabha elections will be announced. When Union Home Minister Amit Shah was recently asked about his view on speculation that the BJP will win below-expected seats and the resultant crash in the market, he said both cannot be interlinked.

The performance of benchmark indices during the current polls and the last four elections shows that the Sensex fell twice during 2004 and 2019 elections. The BSE’s 30-share Sensex tanked 4.2 per cent during the 2004 election.

A look at the market’s performance during the 2024 polls, which are underway, and the previous four Lok Sabha elections:

2024 Lok Sabha elections:

The 18th Lok Sabha elections are being held in seven phases, starting from April 19 to June 1. Of the seven phases, five have already been completed.

A month before the start of the general elections, the Sensex lost 0.36 per cent and the Nifty declined 0.27 per cent. The first three phases were conducted from April 19 to May 7.

Between April 18 and May 8, the Sensex and the Nifty rose 1.3 per cent. However, the Sensex and the Nifty crashed 2.6 per cent each during May 1 to 10 as lower voter turnout in the three phases made investors nervous.

Voter turnout in the first three phases was 65.68 per cent as compared to 66.58 per cent in the 2019 Lok Sabha polls. However, the fourth phase of the 2024 election saw an increase in voter turnout with the overall percentage rising to 69.16 per cent as against 68.80 per cent in 2019, resulting into improvement in investors’ sentiments. Between May 13 and May 18, the Sensex rose 1.7 per cent and the Nifty gained 1.8 per cent.

According to market analysts, the trend seen in the current election is similar to what was witnessed in the past general elections.

“You start with positive expectations then become nervous, and towards the end you again become positive. It has happened in the past and will happen this time also,” said Deepak Jasani, Head of Retail Research, HDFC Securities.

Market participants are keenly waiting for the exit poll outcome which will be announced on June 1.

2019 Lok Sabha elections:

The 2019 Lok Sabha elections were held in seven phases starting from April 11 to May 19, and the results were released on May 23. The BJP saw a landslide victory as it won 303 seats and the Congress got 52 seats.

A month before the first phase of the election began, the Sensex and the Nifty gained nearly 4 per cent each. During the seven phases of the election, which were spread over a month, the Sensex fell 1.69 per cent. On the day of results were released, both the indices lost 0.7 per cent. In the following month after results were announced, the Sensex was up 0.98 per cent and the Nifty 50 was up 0.6 per cent.

2014 Lok Sabha elections:

In the 2014 general elections, the BJP emerged as the dominant party after winning 282 seats. The Congress party performed badly, winning just 44 seats. The polls were conducted from April 7 to May 12. The 16th Lok Sabha elections saw the highest-ever turnout of 66.44 per cent.

A month before elections (March 6 to April 4), the Sensex gained 3.93 per cent and the Nifty rose 4.58 per cent. The momentum continued during polls, with the Sensex rising 5.4 per cent. On the day of the declaration of results, the Sensex rose 0.9 per cent and the Nifty was up 1.12 per cent. Both the indices were up over 4 per cent each, one month after the 2014 general election results were announced.

2009 Lok Sabha elections:

The general elections for 2009 were held in five phases from April 16 to May 13. The voter turnout ratio was 58.21 per cent. The Congress party won 206 seats and the BJP got 116 seats.

A month before the first phase of polling started on April 16, the Sensex and the Nifty surged around 28 per cent each. Between April 15 to May 13, the Sensex gained 6.51 per cent. On counting day, the stock market rallied, with the Sensex and the Nifty rising over 17 per cent each. A month after the results, the Sensex rose 4.71 per cent and Nifty was up 4.5 per cent.

2004 Lok Sabha elections:

The election for the 14th Lok Sabha was conducted in four phases from April 20 to May 10. The counting was done on May 13. Voter turnout in the election was 58.07 per cent. While the BJP won 138 seats, the Congress got 145 seats.

One month before the start of the elections, the Sensex and the Nifty rose over 6 per cent each. Between April 19 and May 10, the Sensex declined around 4.22 per cent. On May 13, when the results were announced, the Sensex rose 0.8 per cent and the Nifty was up 0.37 per cent. However, a month after the results were declared, the Sensex crashed 10.5 per cent and the Nifty tanked 12.17 per cent.