Decoding the Past: Do Elections Shape Sensex and Nifty Dynamics?

It is a well-known fact that the stock market is volatile and keeps fluctuating in response to local and global happenings. For instance, the market was volatile during the interim budget this year. While railway stocks dropped, stocks under sectors like banking and housing finance rallied after the budget announcement.

The Lok Sabha Election 2024 is one of the year’s biggest events. While political enthusiasts are predicting the next government, investors and traders are keen on how the general elections can impact the markets.

You may also be keen to find out if elections can really impact the market and its benchmark indices, Sensex and Nifty 50. Let’s look into the historical performance of the market to conclude.

A Quick Historical Recap

When looking at the past four election years, i.e., 2004, 2009, 2014 and 2019, only in 2004, both Sensex and Nifty 50 experienced negative returns post-election results. During the other 3 years, i.e., in 2009, 2014, and 2019, the two benchmark indices delivered positive returns.

2004 Elections

In 2004, though the benchmark indices didn’t perform well, resulting in a crash of 20% after 2 days of election results, subsequent developments contributed to market confidence. This led to positive returns for the rest of the year.

2009 Elections

Looking at one of the positive years, 2009, the Sensex and Nifty 50 experienced a significant gain, surging by 26% and 24%, respectively, even before the election results were out. Right from the first trading day post results on May 18, 2009, both benchmark indices rose more than 40% each until December 31, 2009. This mainly was a result of the United Progressive Alliance’s (UPA) success in forming a government independently and a lot of foreign money coming in after the US introduced quantitative easing.

2014 Elections

However, on May 16, 2014, during the exit polls, the benchmark indices experienced a rollercoaster ride. The Sensex touched an all-time high of 25,375.63, which later dropped and closed at 24,121.74. The same occurred with the Nifty 50 as well. It dropped from a high of 7,563.50 and closed at 7,203.

2019 Elections

When analysing the last elections in 2019, the indices gained about only 4-5%. The country’s economic growth struggles were linked to global issues like the US-China trade war and ongoing US Federal Reserve rate hikes.

Summing Up

As we are nearing the 2024 General Elections, market analysts are going through these historical patterns to see if there can be any repetition. While there have been mixed observations in the past, it is now time to witness how the Lok Sabha election of 2024 will impact the market.