The Indian stock market is witnessing heightened volatility and the Nifty 50 has dropped over 4% from its peak. Uncertainty over the ongoing Lok Sabha elections, weak global cues, unimpressive Q4 results and relentless selling by foreign institutional investors have been weighing on Indian equities.
The key trigger for the markets will be the Lok Sabha elections results which will be declared on June 4. While the opinion polls have predicted a sound majority for the ruling Bhartiya Janata Party (BJP) in the Parliament with the Prime Minister Narendra Modi continuing for the third term, worries have been rising about the low voter turnout in the first three phases of the elections.
This gave rise to a key discussion among investors that if BJP fails to gain majority with the INDI alliance forming the government at the center, how will the stock market react.
Also Read: Can Indian stock market crash further before Lok Sabha election result?
Users of social network forum Reddit contemplated on the question whether the stock market will slide down if the INDI alliance comes to power.
Most of the users anticipate a knee-jerk reaction if BJP loses power, but they expect the market to continue to grow in the long-term, regardless of the party in power.
“It doesn’t matter which party is in power. At the end of the day, they’re all capitalist parties and India is going to continue growing as an economy for at least the next 30-40 years. Markets will panic, noise will get loud, and long term investors will continue to accumulate quality stocks and grow their wealth,” commented a user.
Some also drew an inference from the 2008 return of the Indian National Congress-led United Progressive Alliance (UPA) to power, when the Indian stock market hit a 20% upper circuit and trading was suspended for the day.
“So whoever is in power doesn’t matter in the long term as the Indian economy will keep growing only. However, short term knee jerk reactions will be there if the Modi govt fails to get the power again which is pretty obvious,” said another user.
However, some people believe if the market falls, it would be the best opportunity for picking good quality stocks which they missed out in the bull run.
A user also opined that the market may recover very quickly, if it falls off the cliff, led by strong macros.
“Not sliding, but rather falling off a cliff. But recovery will happen very quickly – you can’t artificially keep the Nifty at <20 PE for too long. And we are in a bull cycle not bear cycle, can’t keep sliding down unless there are market-level macro triggers. Right now market macros are positive, so the election result will be like a pit stop. If the expected mechanics don’t show up the pit stop will take longer but the car will continue racing on the circuit while bored audiences watch and wait for the next overtake 3 months from now,” the user commented.
Some reiterated that markets like stability and a weak coalition government may pose a risk to the market.
“Market likes stability. Anything uncertain or volatile will keep the price down… A stable government will be good for market…” he said.
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Published: 13 May 2024, 03:15 PM IST
