The Lok Sabha elections 2024 are set to kick off on April 19 and will continue for the next 44 days before concluding on June 1. This once-in-half-a-decade political event is significant for most Indians since it touches their lives in more ways than one, particularly their savings and investments.
There is no denying the fact that the Lok Sabha polls are an important event when seen through the lens of investing; therefore, they impact people’s financial goals – marginally, if not substantially.
There is good news as well as bad. The good news is that financial markets tend to deliver good returns every election year. During the past four general elections, markets delivered double-digit returns. But the bad news is that most of the returns are believed to be factored in this time.
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“If one takes the calendar year returns of Nifty50 in an election year, the Nifty has delivered a double-digit growth in all periods (2004: 10.68 per cent, 2009: 75.76 per cent, 2014: 31.39 per cent and 2019: 12.02 per cent),” says Shiva Subramaniam, COO and Asset Class Expert, Whitespace Alpha.
A done deal or surprises ahead?
Experts believe that the financial markets have already factored in the optimism which stems from the expected outcome of the upcoming general elections. So, there is little possibility of too much volatility ahead.
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“Favourable election outcome has already been priced by the market participants. Going forward, market movements are likely to be influenced by the earnings visibility,” says Hemang Kapasi, Head of Equities, Sanctum Wealth.
But there could still be surprises ahead. So the investing decision should not be based on the ‘done deal’ as it is made to believe. Naveen KR, Smallcase Manager and Senior Director at Windmill Capital says that there could be three varied scenarios based on the election results.
“First, if there is a reversal like 2004 where against all expectations, the current government gets overturned. In that case, markets would see a correction. Second, if the BJP doesn’t achieve a stomping majority, that might also dampen the spirits. Third, if the BJP gets an overwhelming majority, markets would celebrate that,” he says.
What should investors do now?
Investment experts assert that goal-based investing should not be influenced by the market cycle or any short-term fluctuation that hinges on a range of factors including election results.
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Preeti Zende, a Sebi-registered investment advisor and founder of Apna Dhan Financial Services, says that certain domestic and international events impact the share market in the short term but as far as goal-based investment is concerned, investors should not decide their strategy based on such events.
“In the long term, what matters is economic growth, companies’ performance and investors’ confidence. So, retail investors should not get carried away by short-term volatility but must focus on long-term wealth creation,” she opined.
Mohit Khanna, fund manager, Purnartha Investment Advisers, tells investors to take a step back to analyse the whole situation and they will realise that most of the news is just noise and has no bearing on the earnings of the companies.
“Additionally, Government spending is generally slow during the elections which catches-up immediately post elections,” he says
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Published: 18 Apr 2024, 07:25 PM IST
