Election Effects: A Historical Look at Stock Market Performance
A study of past general elections reveals that key sectoral indices tend to turn positive three months after the election outcome.
Stock MarketGeneral ElectionsBse SensexJm FinancialReal EstateSmallcap StocksMidcap StocksLargecap SharesIt StocksConsumer DurablesReal Estate NewsMay 29, 2024
This year, the elections will conclude on June 1, with vote counting scheduled for June 4. The market is expecting a strong performance from the incumbent BJP, with predicted seat wins ranging from 300 to 320.
In the past, the BSE Smallcap index has surged an average of 10.7% in the first month after elections, while the BSE Midcap index has climbed 7.3%. The BSE Realty index, which tracks commercial and residential real estate developers, has delivered an average return of 16.5%, while the BSE Power index has given an average return of 10.9%.
Information technology, real estate, and consumer durables stocks have historically performed well in the three months following elections. IT stocks, along with smallcap stocks, have delivered outsized returns in six months post-elections.
While past performance may not be a guarantee of future results, JM Financial expects healthy gains to follow the election results on June 4. The broking firm notes that policy continuity will ensure the government's focus remains on infrastructure development and manufacturing, benefiting sectors in defence and capital goods space.
However, unlike in past periods, JM Financial prefers large caps over small and midcaps in 2024, citing valuation comfort. On a sectoral level, the firm finds valuation comfort in private banks and consumption space, which are expected to outperform the benchmark in the near term.
At present, Nifty is trading at 20 times forward PE, closer to one standard deviation from long-term mean, which JM Financial considers reasonable.
JM Financial is a leading broking firm that provides expert analysis and insights on the Indian stock market.
Business Today is a leading business publication that provides stock market news and analysis for informational purposes only. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
Frequently Asked Questions
What has been the historical performance of small and midcap stocks post-elections?
Small and midcap stocks have outperformed largecap shares in every timeframe in past cycles
Which sectors have historically performed well in the three months following elections?
Information technology real estate and consumer durables stocks have historically performed well in the three months following elections
What is JM Financial's outlook on the market post-elections?
JM Financial expects healthy gains to follow the election results on June 4 and believes that any dips should be bought into
What is the current valuation of Nifty?
Nifty is trading at 20 times forward PE closer to one standard deviation from long-term mean
Why is JM Financial preferring large caps over small and midcaps in 2024?
JM Financial is preferring large caps over small and midcaps in 2024 due to valuation comfort
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