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How deeply will 2019 elections impact the Indian stock market, Share market tip

  • Posted Date: December 17, 2019

The Indian elections are just around the corner and this is a time wherein nifty tips of an able and seasoned financial advisory can come across as priceless for making an investment in stocks that would yield lucrative returns over the time to come. The elections are just around the corner and that is sure to lay an influence to some degree on stock markets and equities as well. Prudent stock tips, as enabled by a knowledgeable stock advisory can let investors boost their profits in a time as critical as the present.

We’d witness some of the top rivals fight it out for coming to power in the biggest democracy in the world. Talks of volatility in markets are widespread and heard of frequently. Uncertainty prevails in the air, but how deeply do the elections or their results impact the markets?

Going by the history gives is reasons to believe that the markets stay more or less indifferent to elections and their results alike. But, having a stable government in the centre lays an impact on Indian investors, and foreign players alike. It was during UPA government’s rule in 2004-08 that the greatest rally in Indian markets had come to fore.

Another scenario that we can recall in this regard is markets in 1990s, when India had four prime ministers within a matter of three years. The markets did pretty well at this time as well. The equities have in the past managed to overcome some major hurdles as well, such as economic sanctions laid on India post Pokharan nuclear tests.

After overlooking all these difficulties, within the 10 year phase from 1988 to 1998, the markets grew six times in size. The sensex expanded from the levels of 600, to 3,600 in 1998.

The metrics that really make a difference to share markets are an enhancement in corporate profits, and the macro conditions of global liquidity, economy and interest rates. Politics does lay an influence on the markets, but not as significantly as these factors.

Even while the approach towards economy varies from one political party to another, the underlying agenda remains more or less similar. Both, NDA and UPA governments have had their very own distinctive highs. In a very broad manner, NDA government is believed to be a better performer in fields such as privatization, faster reforms and economic liberalization. UPA, on the contrary was a bigger boost for rural economy, and saw more money reach the farmers. This was as enabled by social schemes, higher subsidies and stronger hikes in MSP with regards to agricultural produce.

But in spite of the differences in the agenda of the two parties, we can come to access that their numbers for economic growth are pretty much comparable. Across past 15 years, GDP growth has stayed affixed at 7.5-8% per annum, in spite of the governments that have been changing. This involved 5years of NDA’s rule, which was followed by 10 years of UPA, and followed by 5 years of NDA’s rule again.

Some of the very important factors which influence investor behaviour and the equities include government’s fiscal health and liquidity conditions across a global scale.

Ultimately, it is the earnings that bring about a difference in valuations. Corporate earnings have reached the stage of inflexion point, and are likely to come across a significant turnaround for the better in fiscal year that follows. With a double digit growth in earnings as stipulated, the prospects look bright for equities as well.

As corporate lending banks such as Axis bank, ICICI bank and SBI have spiralled towards success, they have come across as driving forces for earnings as well. They are three significant market players, and by their own virtue, could boost the value of incremental profits from Rs 60,000 crore to Rs 65,000 crores in FY2020. This would be on a base of total sensex earnings of Rs. 3, 20,000 crore in FY2018.

The sounds for polls are now loud and clear, but an investor must look beyond and focus on huge earning opportunities that lie right ahead.

Presently in the stock market, smart money is returning and the foreign investors are attempting to find the right bracket for themselves as they are anticipating the Modi government’s return to power. In the month of March till date, portfolio investors from abroad have put Rs 42,999 crore into domestic equities. Nifty is up by 6% in March till now.

This is significant improvement from last month, wherein FPIs had put in a total of Rs. 11,182 crores in India’s capital markets, involving both, equity and debt.

At a juncture such as the present, it is recommendable for investors to go for stocks on the basis of their fundamental strength. While cyclicals may be put as avoidable at this point, top consumer and financial names are more likely to yield positive returns.

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