Upcoming General Elections and the Equity Markets

Election Voting
The election campaign, Promotion and advertising of candidate.

The upcoming General Elections in India is a big event, probably the biggest which no other democracy in the world has experienced. The number of eligible voters is close to 900 million, the number is larger than entire population of Europe, and around 100 million of the 900 million would-be first-time voters.

The stakes are high and why not, India is the sixth largest economy in the world.

A Consumption led economy enjoying such a huge Demographic dividend (more than 65% of the Population below 35 years of age), educated work force and digitally enabled middle class, the outcome of upcoming General Elections will define India’s journey towards its ambitious target of reaching a $5 trillion economy by 2025.

The mood of the nation is different this time than what it was in 2014. Anti-incumbency against the ruling Congress party led Government, Corruption charges, High Inflation favored Narendra Modi led Bhartiya Janata Party (BJP) to win overwhelming majority. Stock market was convinced of Modi led BJP Coming to power and markets rallied since September 2013 till May 2014 giving stellar returns during Pre-Election rally.

Voting for the right candidate is never easy
Voting for the correct candidate

2019 does not seem to be an easy ride for Modi led BJP.  Demonetisation, hurried implementation of GST, Visible rift between Government and Reserve Bank of India over policy implementations have put the Government under severe criticism. However, the spat of India Pakistan tensions over Terrorist attacks in Pulwama, counter Air Strike on Terrorist Camps by Indian Air Force and dispersed opposition has tilted the sentiments in favor of the ruling Government. Stock Market has rallied hoping the second straight win for Modi led BJP.

From a stock market participants’ perspective next three months are going to be volatile creating confusion in Investors mind whether to Invest or stay away from Stock Market. For an Investor, such state of volatility provides an opportunity where certain companies’ shares at times are available at very attractive valuations and Investing in them can provide handsome returns in the long run.

From an Investors perspective, one needs to analyze Sectors/Companies which can have minimum impact irrespective of the election outcomes.

Shares of Consumption based Companies, Select Private Banks and FMCG Companies looks attractive. Media and Liquor Companies can also be looked at from an Investment point of view.

Someone having a low aversion towards direct equity investment can also benefit by opting for Systematic Investment Plan (S.I.P) in Equity Mutual Funds Schemes.

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