PM Modi sees stock market breaking records in election week; what history suggests

After Union home minister Amit Shah's recent bullish comments on stock market, Prime Minister Narendra Modi also suggested that the stock market could shatter records in the week of election outcome, as he eyes the third term at office. The "stock market programmers will get tired of the action," he told a news channel while clarifying he has no intent to influence investors.

Modi's BJP won 303 seats in 2019 alone, bettering its 282 seats in 2014. While various opinion polls earlier suggest 370-410 seats for the BJP-led alliance this time, market fears are the seat count could be in the range of 300-310. BJP has set a target of 400 seats. 

PM Modi told NDTV that during his tenure the BSE Sensex climbed from a mere 25,000 level to 75,000 level. "PM Modi has hinted about a sharp rally in the market after June 4th. The market is likely to move ahead before the election results since the market is smart enough to anticipate the results," V K Vijayakumar of Geojit Financial Services.History suggests markets do welcome election outcomes, as they ease political uncertainty and help market participants focus more on stock fundamentals.  

In 2019, Lok Sabha elections in India were held in seven phases from April 11 to May 19. The results were declared on May 23. While Sensex fell 0.76 per cent on the results day, it surged 1.61 per cent the very next day i.e. May 24; it climbed 0.63 per cent on May 27 and added another 0.17 per cent on May 28. In total, the BSE barometer climbed 3.75 per cent in four of five sessions post election results on May 23, 2019.  

In 2014, elections were held in nine phases from April 7 to May 12, 2014, to elect the members of the 16th Lok Sabha. The results were declared on May 16. 

This time, there was a 'Modi wave' and the stock market was rejoicing even before the election outcome. On May 12, Sensex soared 2.42 per cent; and, on May 13, it climbed another 1.36 per cent. On the election day, the 30-pack index climbed 0.38 per cent, followed by positive readings of 0.90 per cent, 1 per cent and 0.06 per cent in the next three sessions.  

In fact in 2009, when the UPA II government was formed, the market did welcome clarity over politics. 2009 general elections were then held in five phases between April 16 and May 13, 2009. The results were out on May 16. Sensex gained 0.75 per cent on the elections day, 1.44 per cent on May 17 and a whopping 3.75 per cent on May 20. 

On Tuesday, the BSE Sensex was trading 75.37 points, or 0.10 per cent, lower at 73,930.57. The 30-pack index was mere 1,193 points, or 1.61 per cent away from reclaiming its record high of 75,124.28, hit on April 9. 

ICICIdirect said Nifty has historically corrected 6 per cent during polling phase in past four elections and three times hit new highs around election outcome. Nomura India said its base case assumes opinion polls are correct i.e. the BJP retains power, securing a simple majority on its own. The result, it said, would likely calm investor nerves, ensure policy continuity and support macro financial stability."

Equichain Wealth Advisors said the market will be driven by news and sentiment on general election results, exit poll and probability of winning margin of BJP/NDA in the next two weeks.   

"Our strategy this week is to keep exposure around 75 per cent to 80 per cent and we continue to keep balance approach with optimistic view on market," it said.