How will the stock market be affected by the election?

No matter which party will rule, Stock Market likes 'Stability'. An interesting point to note is the market had been rising during the general elections in past in hope that a stable government will be formed in the era of coalition governments. Now, considering the current political situation, there are high chances that a 'Coalition Government' (The condition when no party on its own can achieve a majority in the parliament.) will come into power in 2019.

There could soon be a reason to cheer because modern history shows that it tends to be a good thing for investors. The past six elections show positive returns for Indian equities over the two years that straddle the vote Regardless of whether power changed hands.

The fiscal years prior to elections showed positive gains for the benchmark S&P BSE Sensex index in all but two of the past six ballots, and one of the loser years was 2008 -- when markets around the world were upended by the global financial crisis.

The outcome of the election will definitely determine the growth trajectory of India. Its importance can be mapped in three ways:

  1. It is going to be the first national-level election after demonetization, GST and surgical strike.

  2. And the second fact is that after demonetization most of the state and municipal elections have been won convincingly by the BJP and there is always a “joker in the pack”.

  3. On 30th April 2018 the desideratum for rural electrification has been accomplished.

Let's have an interesting outlook of India's GDP growth during ruling party in less 4 years.

(You are indeed going to enjoy this video)

As per data, The Gross Domestic Product (GDP) in India was worth 2597.49 billion US dollars in 2017. The GDP value of India represents 4.19 percent of the world economy. GDP in India averaged 545.81 USD Billion from 1960 until 2017, reaching an all-time high of 2597.49 USD Billion in 2017 and a record low of 36.54 USD Billion in 1960.

A pre-election break-up for 2019 Lok Sabha Election of people’s opinion is depicted below:

Rarely a Prime Minister gets one-fifth score for OUTSTANDING and one fourth as RISK TAKER. So, on an average 86% of votes are in favour and 14% are against. Similarly, 55% of the votes are in the favour for style of functioning. So, the numbers are in favor of the Ruling Party. However, there are always exceptions.

But, Election is not the only reason for stock price boom. There are various internal and external factors that need to be looked upon during an election year, but not through an election prism.

7 Major events that will impact your Stock Portfolio in FY2018-19 :

1) RBI MEETING: In addition to interest rate decisions, markets watch for RBI’s views on other matters during these bi-monthly meetings.

Expected Upcoming meetings: 5 December and 6 February.

2) GDP GROWTH FIGURES: After the slowdown following demonetization and GST hiccups, these figures are important for tracking the health of the economy.

Expected Upcoming meetings: 30 Nov and 28 February.

3) EXPORT-IMPORT DATA: Due to high imports, the trade deficit is a worry. The data is important now as the situation has been aggravated by global trade war worries.

Expected Upcoming meetings: 12 December, 15 January,14 February, and 15 March

4. IIP GROWTH: These monthly figures point to growth in that quarter.

Expected Releasing dates 12 December, 11 January, 11 February, 12 March

5. CONSUMER INFLATION: RBI is concerned about consumer inflation and will raise interest rates if it goes up.

Expected Releasing dates: 12 December 14 January 12 February 12 March

6. ASSEMBLY ELECTIONS: With the Lok Sabha elections barely a year away, the market will be keenly watching the Assembly poll results before that.

December end: Mizoram, Chhattisgarh, and Madhya Pradesh

Mid Jan: Rajasthan

7. US FED MEETING: Since global markets are concerned about rate hikes by Fed, these meeting will be watched closely. Expected Upcoming meetings: 19 December , 13 January and 27 February.

Bottom-Line: Any news whether positive or negative is absorbed by the market and the market turns bullish in the upcoming days and in the long run the market returns around 12% to 15%. So, any adverse event doesn’t imply that the market will shut down; rather the market always sets its own pace. So, in an election year it is incumbent to keep a watch on the market news, sector news and upcoming events in the market which will definitely set the pace during the election year. So, BUY RIGHT, HOLD TIGHT!


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