How will stock markets react to Lok Sabha elections? ‘Correction inevitable’ - Hindustan Times
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How will stock markets react to Lok Sabha elections? ‘Correction inevitable’

Apr 23, 2024 03:42 PM IST

Bernstein said that a pre-election euphoria is building up as the BJP coalition could possibly win over 400 seats.

The Indian stock market may witness see profit-booking after the Lok Sabha elections as the results will be the trigger, brokerage firm Bernstein said. It also added that a pre-election euphoria is building up as the BJP coalition could possibly win over 400 seats. Bernstein analysts Venugopal Garre and Nikhil Arela in a report noted, “With sky-high expectations having set in, a number near to the 2019 value might trigger a short-term negative reaction, but we believe a profit-booking post-elections is coming anyway, and the election results will only serve as a trigger point for the inevitable."

A bird flies past a screen displaying the Sensex results on the facade of the Bombay Stock Exchange (BSE) building in Mumbai.(Reuters)
A bird flies past a screen displaying the Sensex results on the facade of the Bombay Stock Exchange (BSE) building in Mumbai.(Reuters)

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The analysts said that eventually the macro story will take over and as it stays healthy, there could be expect modest downsides while manufacturing and capex stories will remain a key theme. The brokerage firm noted that polls project as high as 411 seats for the ruling National Democratic Alliance (NDA).

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“A correction is inevitable, and markets that are simply looking for a reason to fall may overreact to a sentiment that may not mean much rationally. On the face of it, 300 seats will still mean the ruling party getting the absolute majority, and a construct similar to 2019, which is, in fact, a continuity of power as well as a continuity of extent of power. Still, it will be seen as a “below consensus" result, and a reaction cannot be denied," the analysts said.

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This can eventually start the end of the current market frenzy that has lasted for a full year, the firm added.

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