Opinion | Results 2024: Market Nervousness, Or Much Ado About Nothing?

At 10:15 am on May 29, the BSE 30 Sensex was 400 points down to 74,770 levels. Markets have been behaving like a see-saw for the past month in India, with multiple bouts of volatility. 

Some experts have linked it to nervousness ahead of the results of the Lok Sabha election on June 4, given how a seemingly one-sided contest has now become tighter, if one were to go by ground reports and social media chatter. 

Other experts believe that since markets have peaked, there is some profit booking, a regular affair in stock markets. Prime Minister Narendra Modi has indicated that the Indian stock market will break all its previous records and participants will be tired of managing the rush after the June 4 election results.

Sensex fell from a peak of 75,038.15 (April 10, 2024) to 72,488.99 (April 18, 2024), before rising again to 74,671.28 (April 29, 2024), falling to 72,404.17 (May 9, 2024) and rising again to 75,390.5 (May 27, 2024). From there on, there has been some selling pressure for the last two days. 

AI Leading The High?

Global markets have been on a roll over the past six months. Nasdaq, S&P and Dow Jones are at all-time highs, mostly driven by a handful of stocks connected to Artificial Intelligence. During this period, Sensex has delivered returns of 11.3%, S&P 500 of 16.6%, Nasdaq 100 of 18.36% and Dow Jones of 9.66%. 

If we analyse the six-month returns of Sensex up to the result days, that is, the December 2018-May 2019 period and the December 2023-May 2024 period, interesting insights are revealed. In both periods, during one particular month in each cycle - March 2019 and December 2023 - markets registered monthly returns of over 7%. 

Previous Election-Time Trends

In December 2018, the Bharatiya Janata Party (BJP) lost 3-0 in the Hindi heartland states of Rajasthan, Madhya Pradesh and Chhattisgarh. This came just around four months before the 2019 general election. It shocked markets and Sensex fell 0.9%. 

In January 2019, the markets recovered a bit, generating returns of 0.26%. In February, the Pulwama incident and the Balakot airstrikes at the end of the month created uncertainty about possible tensions with Pakistan, with the market nosediving 1.22%. 

In March 2019, as the risk of war receded and a deep nationalism fervour captured the mindspace of voters, giving an edge to the BJP. Markets rose by a whopping 7.37% in a month. 

From there until May 2019, when results were declared and Modi assumed a second term in office, markets were on an upswing, generating returns of 0.44% in April and 1.74% in May. 

Now, back to this election season. In December 2023, the BJP won 3-0 in Hindi heartland states, a positive result as most opinion polls predicted Congress win in two states - Madhya Pradesh and Chhattisgarh. 

The results were a boost to the National Democratic Alliance (NDA) ahead of the general election and they neutralised some of the positive chatter around the INDIA bloc and also painted the Congress as the weakest link in opposition unity. Markets, in turn, gave positive monthly returns of 7.53%. 

In January 2024, there was a slight correction of 0.65%. From there on, returns touched 0.7%, 1.44%, 0.7% and 0.51% in February, March, April and May (till May 29), respectively.   

From December 2018 to May 2019, Sensex generated returns of 9.1%. In this election cycle from December 2023 to May 2024, the returns generated were 11.3%, higher than the last time. 

Does this indicate a sign of nervousness, or is this regular market activity, also dependent on various other factors, such as company result season, geo-political risks, profit booking, and so on? The jury is still not out.

(Amitabh Tiwari is a political strategist and commentator. In his earlier avatar, he was a corporate and investment banker.)

Disclaimer: These are the personal opinions of the author