Lok Sabha Elections 2024: What Should Retail Investors Do After June 4 Results? Experts suggest this

We spoke to a number of wealth advisors to get a sense of where they expect the market to go. Although most of them believe that the benchmark indices — Nifty 50 and BSE Sensex — are overpriced and there could be some correction in store. There is, meanwhile, speculation of a substantial correction ahead if the BJP-led NDA manages to get fewer seats than expected.

Excruciating pain could be seen in small-cap stocks and funds if the performance falls short of expectations, says a veteran Mumbai-based equity analyst.

READ ALSO | BJP-led NDA could win 2024 Lok Sabha elections, says Phillip Capital, recommends buying over 50 stocks

“Small cap stocks may fall badly if BJP secures below 272 seats in Lok Sabha elections. The benchmark indices – Nifty 50 and BSE Sensex – may also witness some correction but not substantially. However, the large-cap rally will continue after the election results for a number of reasons,” said a Mumbai-based equity expert on condition of anonymity.

Towards the end of the year, the RBI may cut the key benchmark rate, but it depends primarily on the monsoon. If the monsoon is good, the rate cut could be possible, he added.

“Investors are holding cash and want to wait until the election results. They would prefer to invest at a higher price, but would not make a decision until the results are shown on June 4. Our advice is not to speculate on these short-term market movements. Most investors have no idea how the market will react. So, it is better to wait and watch,” said Ravi Saraogi, co-founder of the company Samasthiti Counselors.

Which way is the tide turning?

The Lok Sabha elections could reveal different scenarios. Based on the outcome, the markets would react accordingly. So, how the benchmark Nifty50 and BSE Sensex react would be a function of the exact outcome of the 2024 Lok Sabha polls.

Anirudh Garg, Partner and Head of Research, Invasion, PMS, said, “If there is a strong BJP majority, markets are likely to respond positively, reinforcing existing sentiment. And if there is a poor performance of the ruling party and it fails to secure a decisive majority, it would lead to market uncertainty and short-term volatility.”

“If a non-BJP government comes to power unexpectedly, we could see a market correction similar to 2004 when the Congress formed the government against expectations,” he added.

READ ALSO | General Election 2024: How different poll outcome scenarios could affect equity, currency and bond markets

Also, Ravi Singh, SVP, Retail Research Religare Brokingit also said the impact on benchmarks will depend on which way the tide turns.

“If the Modi government is able to secure a strong majority, it is expected to trigger a favorable market reaction. If a BJP coalition government with NDA support comes into play, market sentiments could go through a corrective phase, which could make investors skeptical. If the Modi government gets a significant majority, the Nifty 50 is likely to touch 24,200 and the Sensex may touch around 78,500,” said Ravi Singh.

Sarvjeet Singh Virk, Co-Founder and MD, Shoonya de Finvasia said, “Lok Sabha poll results may have different effects on financial markets in the immediate future based on factors such as political stability, policy continuity and investor sentiment. Currently, the volatility in the market can be attributed to various news and unconfirmed updates regarding the outcome of the election. However, an important ongoing trend in this ambiguous stage is the active participation of retail investors. This is likely to continue further, reflecting positive investor sentiment aligning with their expectations of political stability following the results.”

Eyes on the long-term goal

Most wealth advisors argue that investors are advised to look at the big picture rather than get carried away by these “events”, however significant they may seem.

Saraogi said, “Investors should only look at their long-term financial objective and not think too much about the short-term volatility that comes with these events.”

READ ALSO | Market could fall 15-20% if BJP secures less than 250 seats, party allies in three states go wrong: Ruchir Sharma

“While election results can have a short-term impact, longer-term trends are shaped by broader economic forces, technological advances, global events and market fundamentals. In any case, it is crucial to make informed decisions, stay focused on financial goals and respond to real developments, not speculation. It is essential to develop a sound investment plan, choose investments meticulously, diversify to manage risk and remain patient during market uncertainty,” added Virk of Shoonya of Finvasia.

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Published: 30 May 2024, 12:41 IST