General Election Result, Good Or Bad For Economy?

The general elections of the biggest democracy in the world, India, have commenced, and the BJP-led NDA (National Democratic Alliance)  has successfully gained the majority to hold power for the third consecutive time. PM Modi is the only national leader other than Jawaharlal Nehru to become the nation’s prime minister thrice. However, the uncertainty in the elections has impacted the stock market negatively, a stark contrast to what many experts believed. This is mainly because the BJP was not able to cross the 272-seat mark, keeping them from achieving a majority in Lok Sabha. Now, the BJP has formed the government behind the NDA (National Democratic Alliance). This rattled the investors who believed that BJP would form a government with relatively low competition. 

As a result, Indian stock market indices plummeted. On the day of the election results, NIFTY 50 opened at 23,179.50, saw an 8.5% decline, and reached its intraday low of 21,281.45. Sensex also followed suit and fell 8.2%. It opened at 76,285.78 and reached its intraday low of 70,234.43. 

At the end of the day, Sensex reached 72,079.05, a 5.74% decline from its opening on the day. On the other hand, NIFTY 50 closed at 21,884.50, a 5.93% decline from its opening figures on the day. Experts believe that, although the market saw a little volatility after the election results, the underlying fundamentals of India’s economic growth remain the same. That means that the Modi government has started many initiatives and schemes that will help the economy grow at a marvelous rate. As evident from the past two terms of the NDA government, the tech, service, and manufacturing sectors are the main focus points for the government. Moreover, continuous investment in these sectors will result in increasing share prices of the companies pertaining to these sectors. 

Most experts believe that the market will bounce back once the government releases its 2024 budget. This is evident two weeks after the election result as SENSEX has already bounced back and has reached around 76,992.70, and NIFTY 50 has also surpassed the opening figures of result day. NIFTY 50 has reached 23,465.60, which is a new all-time high.

The CEO and MD of Motilal Oswal Financial Service, Ajay Menon, said, “We expect the volatility around the outcome to reduce over the next few days, and the market focuses on returning on macro and fundamentals, which remain strong. Once the new government is formed, it will present its first and full budget for FY25 in the next few weeks, where themes like capex, manufacturing, rural, consumption, and credit lending will be back in focus. The rural and consumption theme would also pick up pace with the onset and progress of Monsoon, which is predicted to be above normal this year.

This shows that the Indian stock market is still a good investment choice. This same trend was also seen in the previous elections. For instance, in the 2019 general elections, the sensec fell 0.8%, while the NIFTY 50 fell 0.9% on the day of the results. Experts claim that this happened due to the same reason as in 2024. Investors expected a landslide victory for the NDA but the performance was not as expected. 

In 2014, the impact of the elections was just the opposite. After the election results in 2024, the Sensex rose by 0.9% while the Nifty rose by 1.1%. Applying the same logic, the reason for this is the landslide victory of the NDA. 

As of now, experts believe that the future of the Indian stock market is bright and that this is the right time to invest in it. NDA government has always been pro-FDI and at a time where companies globally are shifting their manufacturing hubs from Chia to other places, India has a golden opportunity to increase the FDI in the country.

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