If history is anything to go by, equity investors in India are in for a wild ride in the days and months following the general elections which conclude on May 16.
Following the most recent election in 2009, when the Indian National Congress (INC)-led coalition won an overwhelming victory, the benchmark S&P BSE Sensex returned 20.5 percent in the five days after the election. By contrast, in 2004, when the Bharatiya Janata Party (BJP) lost the elections, the index declined 16 percent in the five subsequent days.
“Past experience shows that elections can be harbingers of significant post-election volatility,” Nomura strategists led by Prabhat Awasthi wrote in a report on Tuesday.
However, in the months after the elections, the market ultimately tends to reflect economic realities, notes Awasthi.