Indian shares appear to have started their pre-election rally in March as the nation prepares for the 2019 Lok Sabha elections.
Indian shares appear to have started their pre-election rally in March as the nation prepares for the 2019 Lok Sabha elections. The benchmark BSE Sensex has gained 4 percent since March 1. The CVoter opinion poll has predicted that Prime Minister Narendra Modi's National Democratic Alliance could win 264 out of 543 seats in the 2019 general election compared to 141 for the Congress party-led opposition alliance, reported Reuters.
Moreover, the historical performance of the Sensex prior to general elections also suggest that the 30-share index is likely to continue the rally in the pre-election period.
According to the historical Sensex data on the BSE, the benchmark index saw a massive growth during 2009 general elections quarter. The Sensex surged 49 percent from the April-June quarter. However, during the April-June 2014, the index had seen a 17 percent rally.
The twin reason behind the stock market rally in 2009 was the general elections and the bounce back from the global financial crisis. In 2008, the financial system of all the countries had crashed. However, the dull period was soon famished in 2009 when the bull market took over and the great rally began.
The rally of 2009 was exactly a decade ago, and what we are witnessing right now is a similar rally. Last year, benchmark indices saw a lull period which is regaining momentum now. In fact, Sensex has already moved up 4 percent since March 1, 2019.
Coming back to the post-election performance, Sensex fell 3-8 percent in two months after 1999 and 2014. However, it was opposite during the 2009 elections when the Congress coalition came into power and the Sensex gained 17 percent on the result day, May 16, 2009.
Thus, it’s expected that the pre-election rally will most likely remain strong this time as well, similar to 2009 as hopes of the current BJP-led government continuing further is higher. The mid-cap and small-cap stocks are gaining the most returns as they are available at cheaper valuations.
First Published: IST