In addition to changing the political landscape, elections in India also have a significant impact on the stock market and economy. During election season, everyone feels uneasy, from Dalal Street to the average laborer.

However, to what extent does a ruling party impact the trajectory of the Indian market going forward? Political shifts have the potential to bring about modifications to laws, rules, and economic goals, which can have an impact on a number of industries and businesses.

The capital markets’ performance is crucial as India gets ready for the upcoming Union Elections. These marketplaces have served as a window across time, reflecting the country’s political climate and economic vitality. In this blog, we will examine the past patterns of the Indian capital markets, evaluating the results over the pivotal period from November 2023 to May 2024, and considering the possible future course given the current political climate.

November 1998-May 1999 (+36%):  The market felt more stable following the National Democratic Alliance’s (NDA) victory in the 1999 election under the leadership of Atal Bihari Vajpayee.

Since the market had anticipated the results, the Sensex increased by almost 7% and maintained its upward trajectory for the following three months. Consequently, the GDP grew at a pace of about 6–7%. Investor confidence was further regained by the government’s emphasis on fiscal restraint and economic stability, which improved the stock market’s trend and encouraged inflows of foreign direct investment. Increased GDP growth, controlled inflation, and favorable market performance were the outcomes of the government’s focus on structural reforms, sector liberalization, and luring international investment.

Indian financial markets had a notable upswing in the late 1990s. Encouraged by favorable morale and economic improvements, the market enjoyed a 36% gain from November 1998 to May 1999. Growing faith in India’s economic potential and a rise in foreign investments were the defining features of this time.

November 2003-May 2004 (+9%): The Indian financial markets were resilient in the face of worldwide economic uncertainty in the early 2000s. Between November 2003 and May 2004, there was a consistent 9% increase in market value. The ‘India Shining’ campaign, which sought to showcase the country’s economic advancement and development potential, served as a marker for the time. Due to the results not aligning with market sentiment, the market saw a 15% decline in two to three trading days following the 2004 election.

November 2008- May 2009 (+31%): The market had hoped for an NDA administration, but Congress had formed one. Following the initial disappointment, the market had a bull run that lasted until late 2007. This period was also marked by record-high foreign direct investment of $34 billion in 2007 and a strong GDP growth rate of about 8%.

The bull market ended in 2008 due to the global financial crisis, but by the time India had its elections in 2009, the market had begun to rebound. India was not immune to the economic shockwaves caused by the 2008 global financial crisis. In spite of this, the Indian stock markets were remarkably resilient, rising by a noteworthy 31% between November 2008 and May 2009. The fiscal stimulus measures implemented by the Indian government were essential in stabilizing the economy.

November 2013–May 2014 (+19%): The market’s standard deviation decreased from 17.96% to 9.1%, indicating a more stable trading environment due to the decreased volatility. There was also a significant surge in the stock market, which saw record highs. The Indian stock markets performed well in the run-up to the 2014 General Elections. Between November 2013 and May 2014, the markets expanded by a robust 19%. There was a lot more political activity at this time, and people were expecting that the next elections would result in changes to policy.

November 2018-May 2019 (+11% ): The Indian stock market showed a strong relationship with the political climate throughout the 2019 election season. Investors kept a careful eye on political developments and their possible effects on the economy as the election drew near.

There were times when the stock market was erratic, moving in response to anticipation and news around the election. However, the market responded favorably to the election results, which gave investors a feeling of security and continuity and saw the Bhartiya Janata Party (BJP) win handily and Prime Minister Narendra Modi re-elected.  The months of November 2018 and May 2019 saw a shift in market sentiment toward caution. Moderate growth of 11% was caused by factors such as internal economic issues and conflicts in global commerce. However, investors continued to be attracted to India because of its potential for long-term growth.

November 2023–May 2024 (?%): The performance of the Indian stock markets throughout the crucial period from November 2023 to May 2024 is still a topic of great interest as we approach the Union Elections of 2024. The government’s emphasis on infrastructure development and pro-business measures like “Make in India” were viewed as beneficial for the market. Investors also had good opinions of the tax cuts, the ease of conducting business, and the initiatives to draw in international capital. Several variables, such as domestic events, international economic circumstances, and government policies, will probably have an impact on the direction of the markets during this period.