Friday, May 15, 2009

Elections 2009 and Indian Stock Market

Elections and Indian Stock Market

You can expect to mark up your stock portfolio soon after the new government takes charge next month, since in all probability, there will
be a buying spree after the uncertainty surrounding the poll process ends.
That has been the market's trend after each of the 3 Lok Sabha elections — in 1996, 1998 ,1999

Data on BSE Sensex and the NSE Nifty show that within four to six weeks of the final results in those three general elections, the indices touched a new temporary peak and gained 8-13.5 per cent.

In fact, the gains were as high as 25 per cent if one considers the rise in the indices from the first day of the poll till the short-term peak is reached

Even in 1996 and 1998, when no party got a clear mandate and the governments were multi-party coalitions, the market rallied as investors were relieved of poll-related uncertainties.

But 2004 elections was different for many reasons

The NDA coalition recommended the early dissolution of Lok Sabha and on the advice from Atal Bihari Vajpayee, Dr A P J Abdul Kalam, then President of India, dissolved the Lok Sabha on February 6, 2004.

In December 2003, Indian stock markets were on a roll. Between November 20, 2003 (Close: 1522) and January 9, 2004 (1972) the Nifty gained 29.6%. Only two sessions witnessed a fall of more than 1% during this period.

After this dream run, a corrective decline started. The BJP lost the elections in May 2004 and the Indian stock markets witnessed heavy across the board selling between May 7, 2004 and May 17, 2004. The Nifty had lost 25% in just 7 trading sessions.

Also the news of left coming into Government made the matters worse and sensex tumbled,
But once the clear picture of government arrived ,every one was happy seeing Manmohan Singh at helm and Chidambaram sitting on top of Exchequer and by july 2004 market staged the come back

Now let us see how we can view 2009 Elections

2009 is quite different from 2004,Unlike in 2004 ,nobody expect UPA/NDA to get a run away success,so the water is already murky and indian stock market has accounted for this uncertainity already


Sensex trading at 9x to the expected 2009 earnings.
Falling commodity price will ease input cost of the industries.
Government policies to boost the economy.
Inflation at record low.
Lower crude price.
As interest rate in developed economy is record low, indian market could attract investment.

Stability and ability of the government cannot be judged at this point.
Fiscal deficit is high at 5% of the GDP will affect indianstockmarket .
Indo –Pak ,pak -thaliban conflict (indirectly jihadis could hit India to divert attention and built pressure on pak)

Best thing to do is a Smart operators return only when there are signs of consolidation in the market

On some specific tips

IF samajwadi party holds key for next goverment ,no need to tell which groups stocks you shoud buy :)

If infact congress end up on top and didn't dump its UPA alley in tamil Nadu,dont forget the rising sun

If BJP wins ,and they follow what they say in Election Manifesto,you can see a lot of activity in Domestic IT space.

If Left comes into picture ,then power equipment manufacturers is going to take a hit on account of Revoking of Nuclear Deal( very remote chance though)

P.S: Author surely feels only time socialism prevails in Indian is during election,see how voters are spoiled cash, color TV and what not ..,cant blame common man if he wants elections every year

1 comment:

Chirag said...

Yes Election 2009 results test positive and surely it is a reason for the markets to cheer.