The Exit Polls no doubt indicate a near-term rally and we can see significant volatility in the markets but if you are a long-term investor there isn’t much to worry! Well, that’s according to historical trends and how markets have performed in months following election results between 2004-now.
The outcome typically has had minimal impact for long-term investors. The S&P BSE Sensex Index has consistently gained in the six months following the election results in each of the last five cycles, with a median return exceeding 11%.
Although the market has largely anticipated a victory for Prime Minister Narendra Modi’s party, exit polls indicate that investors expect the party to surpass their previous tally of 303 seats. A decisive victory typically boosts the sentiment while an unexpected outcome can lead to knee-jerk reaction and sharp losses. Long-term trends however depend on the policies of the new government. According to available data, here’s how the markets have performed after past Lok Sabha elections:
2004:
The Sensex fell by 8% in the first week, dropped 9.8% over the next month, declined by 4.8% in the following three months, but rose by 11.3% over six months. In contrast, the Nifty 50 showed mixed returns: it fell around 9% in the first week, followed by a 16% drop over the next month. The decline shortened to 7% over three months, but it rose by over 14% in the six-month period.
2009:
The Sensex surged by 14.1% in the first week, increased by 22.9% over the next month, climbed by 26.6% in the following three months, and soared by 39.9% over six months. The 2009 election yielded robust returns, with the Nifty 50 surging 17% in a week and over 28% in a month. Over three months, the Nifty 50 gained 32%, and in the six-month period, it rose by over 45%.
2014:
The Sensex rose by 2% in the first week, went up by 5.4% over the next month, advanced by 9.2% in the following three months, and increased by 17.3% over six months. Meanwhile, the Nifty 50 surged by 2.5% in a week and 6.3% in one month. Over three months, the Nifty extended its gains by 10.23%, and in the six-month period, it rose by 18%.
2019:
The Sensex rose by 1.9% in the first week, gained 0.2% over the next month, fell by 6.2% in the following three months, but increased by 3.2% over six months. The aftermath of the 2019 Lok Sabha election for Nifty remains mixed as it gained over 2% in one week and just 1% in one month. However, it bucked the trend and fell over 6% in the last three months, only to rebound with a 3% jump in six months.
