As the anticipation builds for the results of the Lok Sabha Elections 2024 on June 4, where the votes of 970 million people in the world’s largest democracy will be unveiled, retail investors are also anxiously awaiting the outcome.
We consulted several wealth advisors to gauge the expected market direction. The consensus is that the benchmark indices, Nifty 50 and BSE Sensex, are currently overpriced and may experience a correction.
There is speculation that if the BJP-led NDA secures fewer seats than expected, there could be a significant correction, particularly in small-cap stocks and funds. A veteran equity analyst in Mumbai warns that if the BJP fails to win at least 272 seats, small-cap stocks might suffer greatly.
While the Nifty 50 and BSE Sensex may see some correction, it is not expected to be substantial, and the large-cap rally is likely to continue post-election due to various factors, according to an anonymous equity expert based in Mumbai.
Additionally, the Reserve Bank of India (RBI) might cut the key benchmark rate towards the end of the year, contingent on a favorable monsoon season.
“Investors are holding onto cash and prefer to wait until the election results are announced on June 4. Our advice is to avoid speculating on short-term market movements. Most investors are uncertain about the market’s reaction, so it’s better to adopt a wait-and-see approach,” said Ravi Saraogi, co-founder of Samasthiti Advisors.
**Market Reactions Based on Election Outcomes**
The market’s reaction to the Lok Sabha election results will depend on the specific outcome. Here are potential scenarios:
– **Strong BJP Majority:** A decisive BJP victory would likely boost market sentiment and lead to a positive response, as noted by Anirudh Garg, Partner and Head of Research at Invasset, PMS.
– **Weak BJP Performance:** If the BJP does not secure a strong majority, it could result in market uncertainty and short-term volatility.
– **Non-BJP Government:** An unexpected victory by a non-BJP party could trigger a market correction similar to what happened in 2004 when the Congress unexpectedly formed the government.
Ravi Singh, SVP of Retail Research at Religare Broking, added that if the Modi government wins a significant majority, the Nifty 50 could reach 24,200, and the Sensex could hit around 78,500. Conversely, a BJP coalition government might lead to market correction and investor skepticism.
Sarvjeet Singh Virk, Co-founder and MD of Shoonya by Finvasia, mentioned that the immediate market impact of the election results will depend on political stability, policy continuity, and investor sentiment. Current market volatility is largely due to unconfirmed news and updates regarding the election outcome. However, active participation from retail investors suggests a positive sentiment aligning with expectations of political stability post-results.
**Focus on Long-Term Goals**
Wealth advisors emphasize the importance of focusing on long-term financial goals rather than getting swayed by short-term election-induced volatility. Ravi Saraogi advises that while election results can impact the market in the short term, long-term trends are influenced by broader economic forces, technological advancements, global events, and market fundamentals.
Sarvjeet Singh Virk from Shoonya by Finvasia added, “It is crucial to make informed decisions, stay focused on financial goals, and respond to actual developments rather than speculation. Crafting a solid investment plan, carefully selecting investments, diversifying to manage risk, and remaining patient during market uncertainty are essential strategies for investors.”
