RELATIONSHIP BETWEEN THE ELECTION AND STOCK MARKET!


Relationship as effect of Lok-Sabha effect on Stocks ?

RELATIONSHIP BETWEEN THE ELECTION AND  STOCK MARKET!
RELATIONSHIP BETWEEN THE ELECTION AND  STOCK MARKET!

Lok Sabha election results decide the top officials for the country.

The elected party will be responsible for policy formulation and other economic decisions for the country.

 These decisions are directly related to stock prices, because favourable policies help in the growth and development of the industry. Therefore, elections are generally considered important for the stock markets.

In the period before the election, generally the government's previous actions and election manifesto are considered indicators for the future.

 Therefore,

if investors feel optimistic in some areas, then they start betting on the best possible shares in the industry or region, which will push their prices further.

At all levels, the government's anticipated reforms and plans influence the sentiments of the market.

This is only the relationship between the stock market and Lok Sabha elections. In the forthcoming elections 2019, the present ruler is a fire test for the BJP government.

The biggest regulatory changes, tax reforms such as GST, Demonetisation have been done by this government. Apart from this, export policies and other policies have been prominent in the last 5 years to promote small businesses.

Companies like Morgan Stanley, along with the biggest rating agencies like Moody's, are optimistic about India's dynamic development which is positive for the stock markets.

Looking at the recent improvement, it is a bit confusing where the market will rise. Analysis of historical numbers can explain this relationship well, because it is not possible to analyse this relation above and from the present.

STATISTICAL HISTORY OF ELECTIONS AND STOCK MARKETS:

To analyse the facts behind the election and the stock market, we have analysed the prices of Sensex for the last 8 elections.

This figure has measured the returns of one year before the election month. Here, for 8 election years, the Sensex has not existed before that and the Nifty is 'small' even in the age.

Dates of electionDate takenSensexDate for pre electionsSensexDifference
November 198921 November 198971521 November 1988718-3
May-June 1991May 17, 1991129717 May 1990781+516
April-May 199626 April 1996376526 April 19953264+501
February 199814 February 1998337315 February 19973521-148
September-October 19993 September 19994709September 3, 19982918+1791
April-May 2004April 19, 2004580017 April 20032984+2816
April-May 2009April 15, 200911284April 15, 200816153-4869
April-May 2014April 4, 20142235913 April 201318801+3558
Source: Business Today

The above table shows the movement in market that year. It can be clearly seen that in the post-election phase, the market has dropped 3 times out of the 8, in that too heavy amounts in the 2009 Lok Sabha elections.

 So it can usually be said that the election rallies in the stock markets. The table above shows the history, which shows a positive sign for the markets in the coming period.

 The election period is near now and no one can expect a rally with this historical number. The rally will be a short run, where short-term purchases and sales can be beneficial.

But if you are a long-term investor, then it is not necessary for you to thoroughly analyse the election results.

CONCLUSIONS:


"Trading" in small time intervals is already risky and for that you must take into account the choice.

 The analysis given above shows that generally the election year goes up the market, but the long-term 'investor' knows that the market always goes up in the long distance.

 The market grows on growth and not because of the election, the government and their plans only affect the speed of that development.

Therefore,

leave the elections aside and invest in the market.


thanks for the time.

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