Impact of General Elections on the Market

General Elections in India are due to take place between April 11th and May 19th, 2019 to constitute the 17th Lok Sabha. If history is an accurate guide, then this is an appropriate time to invest in equity and equity products.

If an investor entered the market six months prior to the General Elections and held their investments for the next two years, they would have made on average annualized return of 23 percent. The past 27 years of data show those who invested in domestic equities and equity products six months prior to General Elections have earned positive returns over the next two years.

NSE Nifty Past Returns during the General Elections

General Election Year Markets 6 months prior elections Markets at the time of the elections Markets 6 months after the elections Markets 2 years after elections CAGR

NIFTY

(from 6 months before to 2 years after)

1991 330.86

(Dec 1990)

391.96

(June 1991)

558.63

(Dec 1991)

761.31

(Dec 1992)

48.9%

(Dec 1990 – 92)

1996 908.53

(Dec 1995)

1122.0

(June 1996)

899.10

(Dec 1996)

1,079.40

(Dec 1997)

8.6%

(Dec 1995 – 97)

1998 1,023.95

(Nov 1997)

1,063.15

(May 1998)

817.75

(Nov 1998)

1,376.15

(Nov 1999)

13%

(Nov 1997 – 99)

1999 978.20

(Apr 1999)

1,325.45

(Oct 1999)

1,406.55

(Apr 2000)

1,125.25

(Apr 2001)

1.5%

(Apr 1999 – 01)

2004 1,615.25

(Nov 2003)

1,483.60

(May 2004)

1,958.80

(Nov 2004)

2,652.25

(Nov 2005)

26%

(Nov 2003 – 05)

2009 2,755.10

(Nov 2008)

4,448.95

(May 2009)

5,032.70

(Nov 2009)

5,862.70

(Nov 2010)

51.9%

(Nov 2008 – 10)

2014 6,176.10

(Nov 2013)

7,229.95

(May 2014)

8,588.25

(Nov 2014)

7,935.25

(Nov 2015)

14.3%

(Nov 2013 -15)

 

Source : NSE

Month-end dates have been considered for NIFTY market levels

Data collected from the National Stock Exchange (NSE) shows us that investors earned the highest returns during the 2009 elections when the UPA Government was re-elected. While the least return has been a positive 1.5 percent in 1999, this strongly implies that the 27-year track record has never seen erosion in wealth for investors when they have taken exposure to equities and equity products before an election.

So, in case you were considering making fresh investments or probably looking to increase your SIP investment, according to historical data, this would be the most suitable time to do that. It could help you achieve your financial goals in a timely manner.

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