If the Bharatiya Janata Party-led NDA fails to secure a working majority in the forthcoming general elections, a 25 per cent fall, if not more, in the share market is all likely, Jefferies’ Christopher Wood reportedly said at Business Standard BFSI Summit 2023.
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Calling it the biggest risk for the domestic stock market, Wood said if the incumbent government does not get elected for the third term, the risk of a bigger correction exists. At the event, Wood, however, suggested less chances of such an outcome.
“If there is a repeat of what happened with the surprise election in 2004, then I would expect a 25 per cent correction, if not more. But the markets would bounce back sharply due to the momentum,” Business Standard reported Wood as saying.
Data showed domestic stocks have historically performed well in the run up to general elections. Six months prior to 2019 elections, Nifty jumped 13.8 per cent; it went up 13.7 per cent in six months to general elections 2014. The index gained 3.5 per cent in run up to 2019 elections and 19.4 per cent in run up to 2004 elections, data compiled by Fisdom Research suggested.
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Nifty returns post six months of elections have been mixed. In 2019 elections, the index delivered a negative return of 1.7 per cent in six months post elections. In 2014 and 2009, the index delivered a solid 18.3 per cent and 53.7 per cent returns, respectively. In 2014, Nifty fell 1.4 per cent in six months post elections amid a surpise UPA win.
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According to India Today-CVoter Mood of the Nation biannual survey, which was published in August this year, the Prime Minister Narendra Modi-led NDA would have won 306 seats, the INDIA alliance 193 seats and others 44 seats, if Lok Sabha elections were to be held then.
