How Stock Market React To Lok Sabha Election Results? Analyzing the Past and the Present 

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Indian stock market is highly sensitive to the political scenario of the country. With Lok sabha election results due today, the market has already started reacting significantly as the vote counting progresses. The effect of political events has always been felt across sectors and it is historically evident that markets reacted positively when pro-business governments came into power with a majority. Before we dig into today’s market reaction, let us look at the previous lok sabha election results and their effect on the market. 

Lok Sabha Election Results 2019

The results were declared on 23 May 2019 for the Lok Sabha elections and the share market election results reacted in a positive manner as a clear majority came to the BJP or the NDA government. BSE Sensex soared by 1000 points, which was around 3.5% on that very day and Nifty 50 also went up significantly. 

The reason behind the surge in the market and the positive sentiment was a continuation of a stable government, which would lead to stability in economic policies and reforms for a better business environment. 

However, as the clear win of the NDA government was expected by most of the people, the market fell at the end and BSE Sensex closed at a 0.76% low and Nifty 50 at a 0.69% low. 

Lok Sabha Election Results 2014

The election’s impact on the stock market was felt after the election results of 2014 when the NDA government came into power after a long wait. BJP’s clear win set the ground for the markets to rally as Lok Sabha election results were declared on 16 May 2014. BSE Sensex soared 6% at that time which was 1200 points and Nifty 50 jumped 300 points or 6%. 

The market rallied as investors expected the new government to bring in better and pro-business economic reforms and policies and develop the business environment in the country, which the government successfully lived up to the expectations. 

Lok Sabha Election Results 2009

Going back almost one and a half decades in 2009, the stock market after election results rallied massively after the UPA government led by the Indian National Congress won the elections with a majority. The Sensex soared 2000 points, while Nifty 50 rose 600 points, almost 17% gain for both the board market indices. 

The reason for the rally was clear and that was the political stability in the economy and policies for economic reforms. 

For how long effect of election results be sustained on the market?

While the stock market after the election and even during or pre-election period can be volatile, historically speaking, the effects subside in a few days or weeks. Especially if the government and the political scenario remain stable, and there are no changes in the government, then the investors after a few days of the results start focusing on the long-term aspects like fundamentals and earnings. 

In case, there is uncertainty in the government, or none of the parties win with a majority, and there is a coalition government, then the market may remain volatile as investors can opt for a wait-and-see approach until the political environment stabilizes. 

How is the stock market performing today?

Exit polls anticipated a clear win for the NDA government with even close to 350 or more seats, but as the counting of votes progressed, NDA is leading in around 290 seats. This has made the scenario uncertain and thus markets are skeptical and booking profits. The BSE Sensex has gone down around 3500 points at 12.06 PM, while Nifty 50 lost close to 1400 points or more than 6% during the first half of the trading session today. The Lok Sabha Election Result’s effect can be significantly felt in the market today; however, the market can turn at any point in time, as soon as some stability is established. Currently, it is driven by the uncertainty and fear.

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