Budget, US Elections – 5 Key Factors That Will Determine Stock Market Performance Over the Next Few Months

The Indian stock market, which plays a key role in the global financial landscape, experienced significant changes in the wake of the Indian Lok Sabha elections. The Nifty and Sensex indices saw significant gains, surging by more than 6% from their closing prices on the day the election results were announced on June 4. In 2024, the Nifty index recorded a staggering increase of over 6.98% and the Sensex index recorded a rise of 5.84%, reflecting the market’s reaction to the election results.

With the election results now clear, attention is now focused on key upcoming factors that may impact the markets.

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“With the general elections over, market participants will be focusing on several key factors in the coming months. Moreover, the Union Budget will be a major event and expectations and reactions will influence market movements. The Reserve Bank of India’s (RBI) stance on interest rates will also be crucial,” said Ajit Mishra, SVP, Research, Religare Broking Ltd.

Looking ahead to the coming months, there are several events that market participants will be closely monitoring, each of which has the potential to have a major impact on the markets.

rainy season

The market is closely monitoring the progress of the monsoon season as it has a major impact on the agriculture sector and the economy in general.

“Domestically, the progress of the monsoon season will be closely monitored as it will have a major impact on the agriculture sector and the overall health of the economy,” Mishra said.

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RBI Policy

The Reserve Bank of India usually synchronizes its monetary policy with that of global central banks. It remains to be seen whether it will wait for the US Federal Reserve to cut interest rates first or act preemptively. A rate cut is favorable for the market and is expected to stimulate economic expansion. The Monetary Policy Committee of the Reserve Bank of India is currently holding its first meeting since the elections and is scheduled to conclude on June 7, 2024.

Proposed 2024-25 Budget

India is set to hold the Lok Sabha elections in April-May 2024, with voting for the budget in February and the base budget due to be announced in July 2024. The budget has traditionally acted as a key market catalyst, with participants closely monitoring fiscal figures, tax policies, reforms, etc. The upcoming budget is likely to be crucial, especially given that the BJP is unable to secure a clear majority.

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US Elections

Another major factor driving the performance of the stock market is the upcoming elections in the United States. The US elections in particular will be crucial in shaping the expected policies in the world’s largest economic power. These key policy decisions will ultimately influence fund movements and foreign investors’ decisions regarding emerging markets.

Federal Reserve Interest Rates

The Fed’s stance on inflation has become highly questionable, especially since price increases since January have not justified a near-term rate cut. Trends in economic data over the next few months will be crucial in determining whether the Fed maintains a prolonged high interest rate stance or opts to cut rates in 2024.

“Globally, the US interest rate environment will be a key focus. The US Federal Reserve’s interest rate decision is likely to have far-reaching implications on global liquidity and investment trends. Additionally, the upcoming general elections in the US will add further uncertainty and potential volatility to global markets,” Mishra added.