Stock Market News: Following the disappointing results of the Indian Lok Sabha elections, selling pressure intensified in the Indian equity market. However, India’s major stock indexes rebounded strongly in the following sessions. A month after the Lok Sabha elections, the Nifty 50 index recorded its highest ever monthly gain following the election results. In a month, the Nifty 50 index surged from 21,884 (closing price on June 4, 2024) to 24,286 (closing price on July 3, 2024), registering a monthly gain of about 11%. Comparing this monthly gain with the previous monthly gain of the 50-stock index following the Lok Sabha election results, this is the highest ever recorded by a major stock index, surpassing the previous monthly gain of 8.90% following the 2004 Lok Sabha election results.
According to stock market experts, this record monthly rally following the Lok Sabha elections can be attributed to a significant drop on the day of the announcement of election results, strong buzz around Q1 2024 earnings, strong portfolio inflows, political stability, robust economic outlook, positive global signals and high liquidity in the market.
Commenting on Nifty’s impressive monthly performance after the Lok Sabha elections, Sugandha Sachdeva, Founder, SS WealthStreet said, “Nifty recorded an impressive return of over 11% a month after the election results, vastly surpassing gains in previous elections dating back to 1999. After a steep drop on election day, the benchmark index quickly recovered and rocketed to a new high of 24,401, generating huge gains for investors.”
Experts at SS WealthStreet said Nifty’s robust post-election performance is driven by a pick-up in portfolio inflows, political stability, strong economic growth prospects and positive global cues.As the markets continue to rally, the upcoming quarterly earnings season and the Union Budget will be key events in predicting the future market direction.
Avinash Gorakshkar, Head of Research, Profit Mart Securities, on the reason for the surge in the Indian stock market following the Indian Lok Sabha election results said, “The results of the 2024 Lok Sabha elections were extremely disappointing for the market, especially as the exit polls predicted a landslide victory for the incumbent Modi government. Hence, the market saw a big drop on June 4, 2024 (Nifty fell by around 1,380 points). However, the results went in favour of the incumbent government, resulting in a strong bounce back. As the market bounced back from the big drop, the 50-stock index hit a new monthly high after the Indian Lok Sabha elections.”
Top 5 Reasons
1]Portfolio inflows recover: “The major factor driving Nifty’s strong performance is the revival of portfolio fund inflows in the market. There was significant outflow from domestic equities for two consecutive months before the elections, but post-elections, foreign institutional investor (FII) funds returned. Portfolio fund inflows into equities in June was around Rs 26,565 crore and another Rs 11,132 crore has flowed in so far this month,” said Sugandha Sachdeva of SS Wealth Street.
2]Widespread backlash: Sugandha further added that the rally was broad-based with small and mid-cap stocks performing well but essentially most sectors contributed to the benchmark index’s 2,500-point surge.
3]Positive Global Cues: “Global indicators are also supporting the current rally in the domestic market. Rising US tech stocks and expectations that the Fed will cut interest rates sooner than expected on the back of easing inflationary pressures and a cooling US labour market have boosted US equities,” Sugandha added.
4]Expectations for strong performance in the first quarter of 2024: “Following the results of the Indian Lok Sabha elections, the market has started reacting to expectations of strong performance in Q1FY25 on the back of India’s favorable economic growth outlook. Following record GST collection reports and high liquidity, there is reason for the market to lean on this narrative,” Gorakshkar said.
5]Inclusion of Indian Government Bonds in Global Indices: Experts at SS Wealth Street said inclusion of Indian government bonds in major global indexes from June 28 is expected to attract large inflows of around $20 billion-25 billion over the next 10 months.
Disclaimer: The views and recommendations expressed above are those of the individual analyst or brokerage firm, and not Mint, and you are advised to check with a qualified professional before making any investment decisions.
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