4th June 2024: The 2024 Lok Sabha election results are crucial for India’s political and economic landscape, directly affecting market trends and investor sentiment.

Potential Outcomes and Market Reactions

Stable Majority Government:

Market Reaction: Positive, with increased investor confidence and market rallies.
Economic Implications: Continuity in economic reforms, infrastructure development, and investor-friendly policies.
Investor Confidence: High, attracting both domestic and foreign investments.

Coalition Government:

Market Reaction: Cautious, with potential for moderate volatility.
Economic Implications: Possible delays in implementing bold reforms due to the need for consensus.
Investor Confidence: Moderate, depending on the coalition’s stability and policy direction.

Hung Parliament:

Market Reaction: Significant volatility due to uncertainty.
Economic Implications: Delayed economic decisions, affecting growth prospects.
Investor Confidence: Low until a stable government is formed, leading to potential capital outflows.

Sectoral Impacts

Infrastructure and Construction: Positive if the focus is on development projects.
Banking and Financial Services: Improved profitability with economic stability and reforms.
Consumer Goods and Retail: Boost in demand with policies favoring rural development.
Technology and Pharmaceuticals: Less direct impact, but benefit from overall economic stability.

Currency and Foreign Investment

Currency Fluctuations: Stability strengthens the Rupee, while uncertainty leads to depreciation.
Foreign Investment: Clear policies post-election attract FDI and FII, supporting market growth.

The 2024 Lok Sabha election results are pivotal for India’s markets. A stable, reform-oriented government will likely boost market confidence and drive economic growth, while political uncertainty could lead to market volatility. Investors should stay informed and watch for policy announcements post-election to gauge the long-term impact on the market.

Views by Experts

1. Manish Chowdhury, Head of Research, StoxBox
Markets have reacted sharply to the initial trends of the NDA leading on around 290 seats which look way behind the exit polls which were projecting around 350-370 seats. With the NDA still looking to form a government, though with the important support of coalition partners, markets look jittery about the prospects of strong decision making. Markets believe that the reformistic approach, which was a hallmark of the previous two terms, might take a backseat in the third term. However, our sense is that it is still early to jump to conclusions and should ideally wait for a clearer picture.

2. Yashovardhan Khemka, Senior Manager, Research & Analytics at Abans Holdings Ltd
The Election results are showing a less than halfway mark for the current BJP government, Pointing towards a coalition government. This will lead to dependence on allies in making key policy decision, and sharing certain cabinet seats, which will lead to policy paralysis and uncertainty in the government’s functioning.

The markets, are pricing the risk associated with this scenario, and the potential impact of shift toward socialistic policies by the government, thus leading to sell-off in the market

3. Manish Jain, Director – Institutional Business (Equity & FI) Division at Mirae Asset Capital Markets
Investors like certainty and continuation of policies. India is a long term structural growth story. A lot of elements are in place. Over anything the economics should prevail. We are already in top in factors like GDP, market cap, demographic dividend etc. It will be an endeavour for all the policy makers to take the country to further heights. I don’t think any derailment on these efforts is in anybody’s interest. As a country we have seen many regime changes. Businesses and markets have weathered all of it and good businesses have always rewarded the investors. If valuations get more reasonable from here on because of some factors, more the reason to invest in India further.

4. Mr. Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd
The infrastructure sector along with the real estate sector is key for achieving the goal of ‘Vikshit Bharat’. We are confident that the new government will continue its focus on both infrastructure development beyond metro and large cities and on the real estate sector, as they have a multiplier effect on the economy. The real sector has seen good growth in the last few years and is poised to achieve new heights. We hope the new government will extend the income tax benefits on home loans in the new income tax regulations as well. We also expect the new government to address some of the challenges faced by these sectors and take the lead in convincing the GST Council to ease the burden of Goods and Services Tax (GST) on both developers and consumers.

5. Mr. Samir Jasuja, CEO and MD of PropEquity
Real estate prices have surged in recent years, nearly doubling in the last four years.

On the contrary tax deductions offered on home loans haven’t kept pace. In effect, the benefit of these deductions has been halved taking into account the rising property values.

In order to achieve the Government objective of $1 trillion real estate industry, reforms are needed to incentivize both buyers and investors.

Reintroducing tax benefits that were previously available could be a significant step. For example, landlords could deduct their entire rental income against the interest paid on the property’s mortgage. Restoring such benefits would encourage investment and boost overall property purchases. This will benefit homeowners a great deal.