Short-Term Impact Of General Elections On The Markets, Economic Indicators: Motilal Oswal's Analysis

Motilal Oswal Report

The countdown begins in earnest:

India prepares to hold its 18th Lok Sabha elections in April-May 2024. General elections are assumed to have wide-ranging consequences, affecting not only the political and economic landscape but also the financial markets.

In this note, we focus on the short-term impact of general elections on four broad parameters: financial markets, monetary variables, fiscal parameters, and indicators related to the rural economy.

For most of our analysis, we consider data from the past five elections (i.e., 1999, 2004, 2009, 2014 and 2019) and analyse the changes in these indicators pre- and post-elections, i.e., six months before and after the election results.

Overall, the benchmark large-cap equity market index (Nifty50) has increased both before and after the elections, with lower 10-year bond yield during most election periods and no uniform trends in the currency.

Further, we find it difficult to establish any uniform patterns in monetary or fiscal variables vis-a-vis election years. Within the rural sector indicators, MSP hikes tend to be higher in the year before elections, but other indicators do not show any connection.

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