Election and Correction in Stock Markets

"The influence on stock markets are so numerous and so complex that no person has ever been able to predict the trend of stock prices with consistent success. – Sir John Templeton"

India is all set to participate in fourth phase of parliament elections. While all political alliances are claiming success, capital markets seem to be thinking otherwise. This is the general perception now-a-days.

Elections will be over in next three weeks and in just 23 days from now on 4^th of June we will have absolute clarity as to who is forming the government. Till then let’s analyse the probable scenarios that can emerge from the elctions and their likely impact on the economy and the stock markets:

A.    BJP wins with thumping majority – It will continue the ongoing economic policies with increased pace and vigour which should bode well for the economy and the markets. Additionally it can take some debatable decisions that may cause unrest in certain sections of the society, like CAA & farm bills few years back. But I don’t think it will have any disruptive impact on the economy. Continue with your investments and increase exposure to equities whenever you find opportunity.

     B.     BJP wins with just simple majority – The current pace of economic reforms and economic policies will continue. Government executives are almost ready with 100 days and five year’s action plan immediately after the formation of the new government. So continue with your investments with increased exposure to equities.

      C.     BJP do not have clear majority and forms government with the help of other parties – It will be a little tuff situation. But we strongly feel that pace of economic reforms and policies will continue and investors need not worry much. Continue your investments with caution.

      D.    Congress forms the government – The most unlikely scene. But still if it happens, it may slow the pace but will continue reforms and policies with little tweaks. So need not worry and continue your investments into stock markets.

      E.     A coalition government led by Non-BJP, Non-Congress Party – If this happens it may stall the growth or even throw back the Indian economy. And on the other hand such government will not survive for more than one and half year. So we may see a dull period in the Indian stock markets.

Present correction in stock markets is due to combination of many factors, three prominent among them are:

1.      Assumption that BJP just mange the majority and not win the way it was being projected till few days back.

      2.      Overall average results of the companies, especially in IT sector and not very encouraging guidance for future.

      3.      It is a technical correction as markets had risen very sharply over last few months amid buoyancy.

So you may take a decision for your money management based on your assumption of electoral results. Or you may discuss it further with your InvestmentMitra and take actions accordingly. Staying invested at this point of time is very important as you may miss the sudden sharp rally that can come into the markets if election sentiments improve. Further you may whatsapp your query on 9958447700 or write to contact@investmentmitra.com

Thank you.

Happy Investing!

Team InvestmentMitra