Sensex, Nifty Fall: What Lies Ahead for Investors as Lok Sabha Trends Disappoint Stock Markets?

Sensex and Nifty recorded a sharp fall as the Lok Sabha elections trends showed that BJP might fall short of majority on its own
Disappointing Day At The Markets, FMCG and Banking Stocks Support Nifty
Disappointing Day At The Markets, FMCG and Banking Stocks Support Nifty

Lok Sabha Elections 2024 results have disappointed the Dalal Street as the Bharatiya Janata Party (BJP) might fall short of the 272-majority mark. As of 01:52 pm, the ruling NDA was leading in 292 seats while INDIA was ahead in 232 seats. Sensex shed over 6,000 points before recovering to 73,034. Nifty also shed over 1,000 points and was trading at 22,243.

The results so far have not been in line with the expectations. Exit polls had shown that the ruling NDA alliance might win seats in the range of 350-400. Following the predictions, markets rallied on Monday with heavy participation from foreign investors. Foreign institutional investors (FIIs) net buy value in the cash segment stood at Rs 6,851 crore while domestic institutional investors bought Rs 1,914 crore during the trading session on Monday.

Also Read: Track the Results of the Lok Sabha Elections Here

While the numbers don't suggest a shift in government so far, the possibility of a coalition government seems to have spooked the investors. Although markets are likely to close in red today with heavy losses, history shows election results don't often cause a big impact on long term returns of the markets.

How Stock Markets Perform Post Elections

The last time the markets saw heavy selling post the results of Lok Sabha elections was in 2004. The National Democratic Alliance (NDA) led by Atal Bihari Vajpayee was unable to return to power which was the base scenario for investors. Post the results in 2004, the markets fell by over 12 per cent in one month. However, they made a quicky recovery and posted 10.4 per cent returns within six months of the election results.

The results of the 2009, 2014 and 2019 general elections were in line with the expectations of the markets. This reflected in the returns post the formation of governments during those years.

In 2024, if the trends hold and the BJP fails to get a majority on its own, it remains to be seen how investors will behave. Investment behemoth Morgan Stanley and popular market strategist Chris Wood had predicted that the win of opposition alliance can cause 25-30 per cent fall in the markets.

But experts also insisted that the long term stability of markets would remain intact. Woods said along with his prediction of stark correction, “The markets would bounce back sharply due to the momentum." 

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