Election Results 2024: Here’s what to expect from Indian stock market and what should be your trading strategy

After witnessing a major bloodbath on June 4 due to Bharatiya Janata Party’s failure to secure a halfway mark majority in the Lok Sabha elections 2024, the Indian stock market will now turn its focus to the core macroeconomic factors and upcoming Reserve Bank of India’s (RBI) monetary policy meeting.

The Lok Sabha elections results 2024 led to a major nervousness in the stock market resulting in worst market crash in four years.

The Indian stock markets had anticipated that the BJP-led National Democratic Alliance (NDA) will win more than 300 seats. However, the election results came worse than expected and the BJP will now have to depend on the NDA alliance to form a government, rattling investors.

Also read: Lok Sabha election results: Basant Maheshwari warns PSU stock holders of downtrend, says to ‘analyse shares’

Nifty 50 plummeted 8.5 percent to reach its intraday low of 21,281.45, opening at 23,179.50, on Tuesday. The Sensex began trading at 76,285.78, and it fell 8.2 percent to reach 70,234.43.

Sensex concluded the day at 72,079.05, down 4,390 points, or 5.74 percent, while Nifty 50 finished the day at 21,884.50, down 1,379 points, or 5.93 percent.

“Indian equities plunged after the vote counting trends suggested a lower seat count for the ruling NDA government. We have seen a spurt in volatility, and India’s VIX crossed the 31.5 level, which created more pressure on the market,” said Ajay Menon, MD & CEO, Broking & Distribution, Motilal Oswal Financial Services (MOFSL).

Where’s market headed in the coming days?

Amisha Vora, Chairperson & MD, Prabhudas Lilladher, says that the market is likely to shed ‘Modi Premium’, which will lead to correction in PSU and infrastructure stocks.

“Once this turbulence stabilizes, attention will shift to the core macro factors affecting India. Investors should brace for volatility in the short term, but the underlying fundamentals of India’s growth story remain strong,” Vora said.

Also read: Will PSU stocks face more sell-off pressure after a 25% drop?

Menon believes the broader market may turn volatile as sentiments get hit, but a major trend of the Indian equity market is expected to revive after the cooldown of volatility over the next couple of days.

“We expect the volatility around the outcome to reduce over the next few days and market focus to return on macro and fundamentals which continue to remain strong. Once the new government is formed, it will present its first and full budget for FY25 in the next few weeks, where themes like capex, manufacturing, rural, consumption, and credit lending will be back in focus. The rural and consumption theme would also pick up pace with the onset and progress of Monsoon, which is predicted to be above normal this year,” Menon said.

While the market volatility may continue in the near term, he suggests retail investors should take this correction as an opportunity to accumulate quality names in 3-4 tranches. Over the next few days, the narrative around government formation and RBI monetary policy would take centre stage.

What should be your trading strategy now?

Looking at the history, stock markets tend to recover and even thrive in the longer term, despite initial volatility. For instance, even after the 2014 and 2019 elections, the Indian stock market saw significant gains in the months following the election results.

Also read: Stock Market Crash: Emkay says market correction not deep enough, advises to stay away from PSUs, Capital Goods

“Investors are advised to focus on long-term strategies, such as maintaining a diversified portfolio and avoiding panic selling. Strong fundamentals and resilience against political changes are crucial for navigating market volatility,” said Pradeep Gupta, Co-founder & Vice-chairman, Anand Rathi Group.

While the immediate market reaction to the election results has been volatile, Gupta believes the overall long-term outlook remains positive, particularly if policy continuity is maintained.

“Investors are encouraged to stay informed, focus on fundamentals, and be prepared for short-term fluctuations,” he added.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.