- Date : 24/08/2023
- Read: 3 mins
The time before the elections can be crucial for the stock market, and we know how to help you make important decisions.
Examining historical examples is essential to gain a deeper understanding of the relationship between elections and their short-term volatility on the equity market, compared to the long-term impact of economic reforms. Although elections may bring about short-term fluctuations, it is the implementation of effective economic reforms and policies that ultimately shape the long-term outcomes.
What are the trends in the stock market when it comes to the year before elections?
Understanding and analysing the trends in the stock market and dealing with the fluctuations.
What should investors do to benefit from the stock market before the elections in 2024?
How Indian stock markets have performed?
In the year leading up to the previous five general elections, the performance of equity markets demonstrated significant fluctuations. The following trends were observed for stock market in election, this was right before the year of the election:
The year 2013 saw the Nifty 50 recovering from a downturn that occurred during the months of August and September, attributable to global headwinds. However, the index managed to recover and concluded the year with positive returns.
In the three months preceding the announcement of election results in 2014, the BSE Sensex, which serves as the Indian stock market's benchmark index, experienced a substantial upswing.
During 2018, the Nifty 50 index hit its lowest point of the year, reaching 9,998.05 in March. Nevertheless, it staged a recovery and climbed to its highest level of 11,738.5 in August, but later experienced a decline again in October.
What do we understand?
Stock markets are characterised by their instability and are significantly influenced by both domestic and international events. Similarly, elections are a significant event in any nation, shaping its economic, social, and political trajectory. In India's case, the stock markets are vulnerable to the impact of elections and tend to display heightened fluctuations during this period.
What should investors do?
Investors have the opportunity to strategically invest before elections 2024 to capitalise on potential sector-specific prospects. The policies put forth during elections not only directly affect the markets but also play a role in influencing the value of the Indian rupee in the foreign exchange market.
A favourable perception of the election outcome by investors can lead to increased foreign capital inflows, which, in turn, bolsters the currency. Foreign investors who choose to invest in Indian stocks can potentially gain from the possibility of rupee appreciation, thus enhancing their overall returns.
Political changes, such as elections or policy adjustments, have a significant influence on the stock market. There is a common belief that if the election results favour the current government, the stock market tends to rise as it signals political stability. But this small guide is a simple explanation to understand these trends.
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Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.