Post-Poll Investment Strategy

Now that the slightly foggy situation that emerged from the election results has cleared and the BJP has taken the responsibility of steering the nation forward through a continuation of its policies to make India the third-largest economy in the world, what should an investor do to maximise the potential for wealth generation? The article takes a deeper look at the post-poll scenario and provides guidelines for both experienced and fresh investors

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Imagine an investor who was off exploring another planet during the first week of June, missing the exit poll of India’s general election and its market reaction. This investor also missed the dramatic turn of events following the actual election outcome. Upon returning to Earth, he observes that the market has risen by nearly 2.2 per cent since his departure, seemingly unaffected by any significant turbulence. However, what he missed was one of the most volatile sessions in the Indian equity market since the corona virus-induced upheaval. This heightened volatility stemmed from an unexpected election result. Market expectations had pegged the incumbent BJP government to secure a larger majority, a sentiment reinforced by exit polls. Consequently, on June 3, 2024, the market surged, with frontline indices gaining 3-4 per cent. The BSE Sensex hit a lifetime high, crossing 76,700, while the Nifty 50 breached the 23,300 mark.

The following day, as the actual election results began to roll in, the market reacted sharply. The exact result was not what the exit note had projected. The BSE Sensex and Nifty 50 plummeted by 5-6 per cent, while the mid-cap and small-cap indices experienced even steeper declines of 8-9 per cent. In absolute terms, this might have been the largest swing witnessed by frontline indices. On June 4, the Sensex experienced a swing of 6,066 points between its high and low, an 8 per cent shift from the day’s opening. Similarly, Nifty 50 saw an intraday swing of almost 1,300 points, double of any of its previous highest intraday swing.