General Elections 2024
As India gears up for a crucial election and Prime Minister Narendra Modi eyes an unprecedented third term, investment management firm Franklin Templeton (FT) highlights strategic investment upside ahead of the elections.
Reflecting on historical election data, Franklin Templeton noted a trend: despite inherent risks, the Indian stock market, as represented by the S&P CNX Nifty index, has reliably delivered positive returns post-elections. Notable examples include the years 2004 (16.1 percent), 2009 (38.7 percent), and 2014 (14.7 percent), showcasing a consistent upward trajectory in the year following the election outcome.
Franklin Templeton pointed out that, according to their analysis, the stock market typically saw an average return of 3 percent within about a month (22 trading days) after the election. However, they emphasized that the majority of stock market gains tend to materialize before the election, with an average return of 10 percent over the four months (88 trading days) leading up to the announcement of the election results.
According to Franklin Templeton’s examination of the last seven elections, there was an interesting case in 2004 where the market decreased before and after the election. Despite this turbulence, the 2004 election stood out, producing the highest returns of 108 percent (equivalent to 44 percent annually) over the two-year period surrounding the election, as highlighted in their analysis.
This period was marked by high hopes for the re-election of the BJP-led government under Atal Bihari Vajpayee, fueled by the upbeat ‘India Shining’ campaign. Surprisingly, the Congress-led United Progressive Alliance (UPA) emerged victorious, initially causing a 13.75 percent decline in the Nifty Index over the month following the election (22 trading days). Nonetheless, strong economic indicators facilitated a market recovery in the subsequent year.
The 2009 elections were notable, with the stock market seeing a remarkable rise of 73.2 per cent approximately 90 days before and after the election result date. The surge was driven by expectations of political stability and economic expansion. The UPA victory and Due to the stronger alliance after its inception, the market gained momentum, with the Nifty index rising 23.1 per cent within a month after the elections.
PM Modi highlighted the importance of the Article 370 film
FT emphasized that under the BJP-led government, significant improvements have been implemented, evident in the expansion of social welfare programs and the effective utilization of the country’s robust public digital infrastructure for direct benefit transfers. More than 300 programs, ranging from subsidized cooking gas cylinders to housing subsidies, have reached nearly 950 million individuals, with government spending totaling US$270 billion since 2017. Access to sanitation facilities has notably improved, while initiatives like rural electrification and housing construction have had a positive impact on citizens’ lives.
Since 2014, the Bhartiya Janata Party (BJP) has maintained its dominance in the Indian government. Recent polls suggest a resurgence in Prime Minister Narendra Modi’s popularity, likely securing his re-election in the upcoming polls.
In anticipation of a potential third term, investors are looking forward to the government addressing key priorities and advancing unfinished agendas, with a focus on maintaining and accelerating the momentum of economic reforms and development initiatives.
According to FT, if Narendra Modi secures a third term, investors expect the continuation of the ‘Make in India’ campaign to draw Foreign Direct Investment (FDI). They foresee the implementation of new labor laws and a boost in infrastructure funding, evident in the $130 billion allocation in the 2024 interim budget, which is crucial for attracting FDI. Additionally, the positive anticipation extends to the filling of vacancies in both high and subordinate courts.
