By Rohit Vaid and Rituraj Baruah
Mumbai, Mar 11 (IANS); History has a habit -- it repeats itself -- and markets are no different. If the saying turns true in 2019, it will be no less than a blessing for investors, as stock exchanges have historically outperformed during the pre-election sessions.
Market observers have even opined that returns on equity investments might soar as the exchanges touch new all-time high.
On Sunday, Election Commission announced a one-and-a-half-month long process for people to either vote for the Modi-led dispensation again or choose an alternative.
Lok Sabha elections will be held in seven phases from April 11 to May 19. Though the announcement followed with market rally of more than 1 per cent on Monday, on a monthly basis the markets have remained largely flat since November 2018.
"In that respect we are similar to 2004 scenario (even then NDA was in power). However NDA lost the election in 2004 and Nifty fell sharply in May 2004, but rose thereafter. The difference is that in 2004, the sideways trend was during the election phase while in 2019, the sideways phase is before the election dates were announced. Volatility will keep rising as election dates come closer," HDFC Securities' Retail Research Head Deepak Jasani told IANS.
"The rise or fall in the markets will be dictated by expectations or lack thereof of a stable government coming into power post elections apart from other global factors impacting their direction."
According to Geojit Financial Services Chief Investment Strategist V.K. Vijayakumar, markets discount most events before the event. But markets can anticipate election outcomes wrong, he added.
"Markets failed to anticipate the 2004 election outcome. And therefore when the NDA lost, the market crashed," Vijayakumar told IANS.
"Similarly the markets couldn't anticipate the spectacular UPA victory in 2009 when they won without the support of the Left. Currently it appears that the market is discounting an NDA victory. This can take the markets higher. The robust FPI inflows are a positive factor."
Historical data showed a bull run in 2009, on the results day. That time the Congress-led UPA won the elections and the markets were up 20 per cent on the result day as fears of a hung Parliament dissipated.
On the other hand, in 2014, the rally started in September. As the market kept getting more and more comfortable with the idea that a single party would get the majority.
"Nifty had gone from 5,100 to 7,000 in 6 months preceding the elections," said Essel Finance CIO Viral Berawala.
"Something like that seems to be panning out again, as the market is getting more and more convinced that the incumbent government would come back."