With the Lok Sabha Election 2024 underway, the stock market has become more unpredictable after reaching record highs. Experts suggest that the Sensex and Nifty indices may experience ups and downs in the days leading up to the election results and on the day of the results. Despite this, many investors see any dips in the market as opportunities to buy, while others are choosing to wait and watch.
Factors Influencing Market Sentiment
Factors like political stability and the economic plans of the main parties have historically influenced market sentiment before election results. On June 4, the day of the election results, the Sensex and Nifty may see significant fluctuations.
According to Deepak Jasani, Head of Retail Research at HDFC Securities, nervousness before the elections, the end of corporate results for the fourth quarter, and investors shifting funds to other markets have led to a sell-off before the election results.
Future Outlook
Market valuations are currently high, with the Nifty trading at around 21.5 times the estimated earnings per share for FY25. The market-cap to GDP ratio is also indicating that Indian markets are on the expensive side.
However, these valuations are influenced by expectations surrounding the election outcome and potential policy changes after the new government is formed. If things go as expected and the monsoon season is favorable, Nifty earnings per share may increase, making valuations appear more reasonable.
Jasani advises investors who are not heavily invested in equities to hold off on making major changes to their portfolios. Once the new government takes office and begins announcing policies, investors can reassess and consider returning to the Indian markets.
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