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Impact of 2024 Lok Sabha Elections on Indian Markets

Politics and The Indian Markets: Explaining The Connection

You must have this question: “Why do even Lok Sabha Elections affect the stock markets?” What does it have to do with the share prices moving up and down on my broker app?

Well, the answer lies in the leadership qualities and cabinet of the ruling party. As the actual progress of a nation lies in its leadership, the government in power is responsible for most of the economy-related decisions. As we discuss elections, they are one of the significant expenses of a nation, amounting to Rs 60,000 Crore in the Lok Sabha elections of 2019 ( Source: News18). The expenditure limit set by the Election Commission of India is set at Rs 70 Lakh, which amounts to 40-50 crores in practice. Thus, elections and money carry an eternal bond!

However, the government promoting digitalisation and ease of doing business has a better chance of growing our economy than the one that does not. The stability of the leadership and its policies are the key to any government’s success in a developing nation. Providing an optimum environment for business growth is also an essential factor!

Since PM Narendra Modi oathed as the Prime Minister of the world’s biggest democracy in May 2014, the country has come a long way! BSE: SENSEX, at roughly 24,200 in May 2014, had touched the 71,000+ mark, recording a growth of ~195%. This number indicates the number of foreign investments brought to India during this journey. 

Over the last decade, the country has seen tremendous growth in GDP due to various initiatives, policies and skilful implementations led by Narendra Modi’s government, which have played an essential role.

To gain a deeper understanding of how past elections have influenced market trends, revisit the ‘Indian Lok Sabha Elections 2019‘. This blog examines the economic and market responses to the 2019 elections, providing insights into the patterns and potential implications for future elections. Reflecting on these historical data points can help investors and analysts predict market movements during election cycles more accurately.

Several Reasons for the BJP Wave: The Boom of the Indian Economy

Sky-Rocketing Figures of GST Collection in FY 2023

Before the Government of India introduced the Goods and Services Tax in India, the initial implementation had flaws. Still, the continuous improvement in its implementation has led to decluttering the Indian Tax System.

Modi Government’s GST Policy faced much backlash from the opposition but ultimately led to higher and higher tax collection per year. The GST collection amount has seen remarkable growth at an astonishing rate of 11.9% Y-o-Y for FY2023-24 up to November 2023, as per the data released by the Ministry of Finance, Government of India, on December 1, 2023. Haryana is at the top for its 44% growth in GST revenue from the last financial year in the state-wise GST reports.

You definitely didn’t expect Indian business owners to pay this much taxes to the government. The Figures speak for themselves! Higher government revenues increase the nation’s economic growth, and thus, each one of these figures contributes to the existing bullish sentiment among investors about India as a developing nation. 

Also, identifying different types of micro, small, and large businesses through Udyog Aadhar Numbers has bridged the gap between the government and small-scale businesses. Their recognition adds up to our country’s GDP on a large scale.

As we analyze the political landscape’s influence on markets, it’s also vital to understand the direct impact of governmental fiscal policies. ‘Budget 2024 – The Ultimate Guide for Fiscal Planning‘ offers a thorough breakdown of the budget proposals for 2024 and their potential economic implications. This guide is indispensable for anyone looking to comprehend the government’s fiscal strategy and its effects on various sectors.

Digital Payment Infrastructure: The Rise of UPI

As India’s digital infrastructure evolves, so does the approach to voting. The ‘Internet Voting – Right2Vote Application‘ blog delves into the emerging technology of online voting and its potential to transform electoral participation. Understanding this shift is crucial for anticipating how technological advancements could influence voter turnout and election outcomes in 2024 and beyond.

Did you even think of using your smartphone to make payments when the UPA(United Progressive Alliance; i.e. Congress Govt) lost elections in 2014?

India has one of the smoothest payment interfaces across the globe. United Payments Interface, or UPI, has numerous benefits and promotes transparency of funds being transferred to government databases. 

As smartphones reach different parts of India, direct money transfer to bank accounts simplifies the payment experience and boosts sales through customer convenience (basically promotes “ease of buying”).

With an active user base of more than 250 Million people executing 350 million transactions daily, UPI transactions have been growing with a 56% Y-o-Y growth, said The Ministry of Electronics and IT, through a tweet on X on November 1, 2023.

This vast growth of UPI since its launch in April 2016 has been one of the remarkable achievements in the Modi Government’s Tenure, which has had an impact globally. Recently, India has been in talks with other nations to implement UPI Technology, which adds to its upsides. The Indian Fintech Sector, including companies such as Paytm, PhonePe and others, has brought in more than $25.8 Billion through investments, with 22 Unicorns in the Indian Fintech space itself!

Bank Accounts to Transport Facilities: Urbanising the Rural India

Bank Accounts

The number of active Bank accounts in India has also significantly increased. Through the Pradhan Mantri Jan Dhan Yojana (PMJDY), the government has successfully reached many people in rural and urban areas to spread awareness about bank accounts. “PMJDY Accounts grow 3-fold from 14.72 crore in Mar’15 to 46.25 crore as on 10-08-2022″  and “56% Jan-Dhan account holders are women and 67% Jan Dhan accounts in rural and semi-urban areas”. 

The people have benefitted from the direct benefits transfer scheme, where they can receive funds directly from the Govt in their bank accounts.

Highway Transportation

With every significant development taking place, highways in India have outperformed them! As per the official data of NHAI (National Highway Authority of India), highways have pushed the construction statistics from “12 Km per day in 2014-15 to 29 Km per day in 2021-22″. (Source: InvestIndia.gov.in) 

Roads connect cities and drive economic growth for the nation. Under the NDA’s leadership, India has grown enormously in the past decade. However, elections account for most of the upcoming fluctuations in the Indian markets, which impact you as per your nature of investing in the markets!

How will the 2024 Lok Sabha Elections impact your Stock Market Journey?

As we move on with our discussion of the impact of elections on stock markets, you need to get your role clear. As elections are a short-term event, they may not cause much difference in your investment portfolio in the long term; however, if you’re a short-term investor or trader, things may not go as desired.

Let’s discuss the impact on traders and investors in the stock market separately.

Discussing the Impact on Traders

Trading is an occupation of risk management, which is more than just generating profits through buying and selling a company’s shares. As most of us know, Trading involves tools and indicators, i.e., you have a Relative Strength Index, Moving Averages and so on. But the ultimate cause of movement or change in the share prices is always its “supply and demand,” which is governed by the people and their emotions.

Sadly, no AI tool has been made yet to analyse the actual sentiment in people’s minds. Fear and Greed are two such emotions that are not easily predictable. Thus, the markets will see ups and downs as the elections close. Therefore, trading is about to get riskier and trickier as we move close to the polls. 

Thus, less experienced traders are advised to take a break if this exceeds their risk appetite, as one piece of news has the potential to change the sentiment, and handling such high volatility is no joke.

Discussing the Impact on Investors

Unlike Trading, investing has a different approach and a different final destination. Building wealth over the long term is the fundamental purpose of investing, which is not majorly affected by events such as elections. 

Stock markets only experience extreme downfall when a significant population of an economy is lost, and businesses shut down (as we observed during COVID), which is not the case with the 2024 elections.

As said by the pioneers, the longer the time spent in the market, the larger the returns! However, generating profits in the short term, as done in trading, is challenging, which is the opposite of long-term investing!


As your long-term investments are safe, exit polls pre-determine the direction of the markets—an example of markets reacting to exit poll results. During the elections of Rajasthan, Madhya Pradesh, Chhattisgarh, Telangana and Mizoram in 2019, the exit poll results caused SENSEX to crash from over 650 points (Source: India Today).

Thus making markets vulnerable to governmental changes. As the country has witnessed growth milestones under the Narendra Modi leadership, the signalling of exit polls in favour of the Modi Government is supposed to favour the markets and keep the bullish trend as it has been through the past few weeks! 

On the other side, this may lead to the markets reacting violently in the opposite direction, and we can witness a massive market correction. As per several analysts and reports, markets can witness a 25% to 30% correction as the fear of new leadership causes instability to crash in! 

Suppose BJP loses the 2024 Lok Sabha elections. In that case, the new leadership is certain to put a halt on their policies, including Make in India, PMJDY and others to promote their policies, resulting in stagnancy in the progress of the nation, leading to reducing investments in the short term and ultimately markets reacting in an undesired way! 

Thus, long-term investors and traders are impacted separately as the 2024 Lok Sabha elections approach! There will be changes, but it will be interesting to see what turns the economy and Indian Markets take in the near future.

Found it useful? Hope you found this blog helpful and learned the connection between the positive sentiment of the people and the existing government.

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