Every general elections year is always a volatile year as you get huge moves in Index on both the sides and 2019 is not going to be different, as we step into general elections. The election result may impact the economy’s road map ahead. In Jan 2018, many experts were cautious because of high valuations in mid and small caps without having earning growth. The whole matrix has changed in 2019 as stocks have given significant corrections and earnings growth also picked up in 2018. We expect 2019 to be a year of net positive investment for both FII’s and DII’s, unlike 2018 where only DII’s were supporting Indian markets.
This is not the year for light-hearted investors who get worried when they see 10%- 15% down move in the Index. Past data shows that those who stayed invested in these volatile period were the biggest beneficiaries including in years of coalition governments.
If we analyze last 5 general election data, Nifty has never given negative return in an election year. In 1999, 2004, 2009 and 2014 Nifty has given 51%, 18%, 80% and 39% each respectively. Equity markets always ride on fear and hope and this year would be no different. Everywhere we are hearing that central elections are there and markets will be volatile, but holding on to your investments at these times might reward you significantly. The recently concluded State elections resulted in BJP losing in all 3 major states. Now markets have given big thumbs up to the result and up by more than 5%. This signifies value buying is emerging and we should be invested at these time irrespective of any party takes control of government with majority mandate.
Historical Calendar Year returns in an election Year
Past data shows that we may have a pre-election rally.
Keeping in mind the above data points, we believe that while markets are likely to be volatile, it would end the year on a positive note. Subsequently, I expect both economic parameters and markets to gather momentum.