Greatness in an election year: Dalal Street may get a lot of cheers in a poll year too, Nifty could ‘post 17% gain’

MUMBAI: Elections are traditionally big economic events in the world’s largest democracy. Why should it be any different in Indian capital markets?

Irrespective of the election outcome, which will determine India’s governance and policy momentum until nearly the end of the decade, brokerages expect the Nifty to touch the 23,000-24,000 range by the end of 2024.

Global factors, geopolitical tensions, inflation and interest rate trajectories are also unlikely to have any impact on the gauge’s directional trend.

Drawing insights from historical data over the past 40 years during election years, analysts expect the benchmark to return about 17% in 2024. The Nifty index has rallied 18% so far this year.

According to data compiled by ICICI Securities, during general elections, stock returns were positive in 9 out of 11 cases, with a median return of 17%. In 2019, Nifty rose by around 14.3%, while in 2014, the index rose by 30%.

The remarkable surge of 81% in 2009 was a rebound from the 52% plunge in 2008 triggered by the global economic crisis. In 1998 and 2004, Nifty recorded returns of 63% and 13% respectively.

According to analysts, the Indian stock market exhibits certain characteristics during an election year.

“2024 is a union election year which will have a significant impact on the sentiment in the stock market,” said Dharmesh Shah, head of technology at ICICI Securities, giving a handsome target of 24,700 by the end of 2024. “We should use election year volatility as a buying opportunity as we have observed that benchmark indices perform well in election years despite spikes in volatility.”

In the last four election years since CY04, Indian stocks have recorded positive returns. Nifty recorded a minimum of 11% and a median of 22%.

The banking, financial services and insurance sectors, which make up the most important parts of the market, have delivered double-digit returns in three of the four election years. Likewise, sectors such as automobiles, power, construction and infrastructure have been in the spotlight on at least three occasions during this election cycle. On the defensive side, the consumer, pharmaceutical and IT sectors have shown relatively stable performance over the last four election years.