Lok Sabha Elections 2024: Volatility is on the rise in the stock market after benchmark indices hit all-time highs. Experts believe that volatility in the Sensex and Nifty indices is likely to increase further in the few sessions leading up to the announcement of the election results and on the day of the results announcement. However, with the overall bullish mood in the market, many investors are looking at the corrective dip as an opportunity, while some patient investors are staying on the sidelines.
Experts say in the past, variables such as political stability and economic policies of major parties have influenced market mood ahead of the election results.The Sensex and Nifty indices are likely to see wide swings in both highs and lows on June 4, when the results are announced.
Also Read – 2024 Election: Diversify your portfolio to mitigate risk and focus on defense
Deepak Jasani, head of retail research at HDFC Securities, said pre-election jitters, the end of fourth-quarter corporate earnings season is fast approaching and capital inflows to other cheaper markets have led to this sell-off ahead of the election results.
Market valuation is not cheap
“The Nifty is trading at about 21.5 times FY25 expected earnings per share, which is currently at the upper end of valuation going by historical trends. Also, in terms of market capitalization to GDP ratio, the Indian market is at 1.4 times. Hence, the Indian market is not cheap, it is leaning towards expensive,” Jasani said.
However, subsequent events (general election results) and expectations regarding policy thrust and FPI inflows once the government is formed have led to this valuation level. If these turn out as expected and monsoon strength and spread is normal, Nifty EPS could be lifted and valuations may become more reasonable, Jasani added.
Also Read – Lok Sabha Elections 2024: Stable results and favourable pre-budget announcements could boost markets – Anshul Alzareh
Wait until policy announcement
Investors who are not over-invested in equities do not need to do anything with their portfolios (apart from some review and rebalancing) as this sell-off may turn out to be minor in the grand scheme of things later on. Investors may come back into the Indian markets once the expected political parties/coalitions are sworn in and make a series of policy announcements in the first 100 days.
Disclaimer: The views and recommendations expressed above are those of the individual analysts or brokerage firms and not those of Mint. We recommend that you check with a qualified professional before making any investment decisions.
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