General election With the situation not being clear about the formation of the government after the results of the 2018 elections, market experts said on Tuesday that the future of the stock market depends on the economic policies of the new government in which factors like GDP growth, inflation and global conditions will play an important role. The BJP-led National Democratic Alliance (NDA) is seen ahead of the majority in the trends of the election results. But the market is beginning to worry about the possibility of the government’s decisive policies being affected by the increased dependence on the alliance partners.
Stock market investors suffer huge losses
The massive fall in the stock market confirmed this apprehension. Both the BSE Sensex and NSE Nifty index recovered a bit after falling by up to eight percent during trading but finally closed with a huge loss of about six percent. The Sensex fell 4,389.73 points to close at 72,079.05 and the Nifty fell 1,379.40 points to close at 21,884.50. However, after the last phase of voting on Saturday, the exit polls on various news channels had predicted a huge majority for the BJP-led NDA. Encouraged by this prediction, the stock market had registered a jump of about three percent on Monday.
will have to depend on allies
In fact, experts cautioned investors to be prepared for volatility due to the currently high valuations and suggested adopting a diversified approach. Manish Chaudhary, Head of Research, Stoxbox, said that the reformist approach that characterized the last two terms of the NDA government may take a back seat in its third term. This is because the BJP is not in a position to get a majority on its own and will have to rely on its allies to run the government.
Selling in the market is expected to continue
Yashovardhan Khemka, Senior Manager (Research and Analysis) at Abans Holdings, said, “Having a coalition government will increase dependence on allies for taking important policy decisions and for some important positions in the cabinet, which will create policy confusion and uncertainty in the functioning of the government.” Khemka said that the markets are assessing the risk associated with this scenario and the impact of the possible inclination of the government towards socialist policies, which may lead to selling in the market.
Due to this there was a record jump in the market
Suman Banerjee, Chief Investment Officer at Hedonova, said, “The future path of the market depends on the economic policies of the new government, with factors such as GDP growth, inflation and global conditions playing an important role.” Since the formation of the Narendra Modi-led government in May 2014, a combination of promises of reforms, improving economic conditions and political stability have supported a steady rise in Indian stock markets.
The surge added over Rs 300 lakh crore to investor wealth. Experts said investors like an environment of certainty and continuity in policies and India offers a long-term structural growth scenario. “A lot of factors are in place. Above anything, the economy has to be strong. We are already on top of factors like GDP, market capitalisation, demographic dividend,” said Manish Jain, director (institutional business) at Mirae Asset Capital Markets.
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