Elections and Stock Market
Stock market fluctuation is based on news. The news which is related to economy, political events weather conditions and relationship between countries could impact on stock market fluctuations. History has demonstrated that stock market (financial system) plays important role in economy for economic growth. Stock market is also reflects the country’s status. Now a days, stock market has been impacted by many factors which are political, weather condition etc., we are in technological world where news could be spread all over the world within a short span of time. Because of this, every news could be reached to the public so that investors could analyse news which is related to stock market. So stock market fluctuation is based on news. The news which is related to economy, political events weather conditions and relationship between countries could impact on stock market fluctuations. Political events usually have great impact on the stock market. In many cases, the stock market fluctuates because of political announcements such as regulation promulgation, law amendments and national elections.
General election results decide the apex authorities for the country. The elected party will be responsible for the policy formulation and other economic decisions for the country. These decisions directly related to the stock prices, as the favourable policies lead to industry growth and vice versa. Therefore elections are considered to be crucial for the stock markets.
In the pre-election period generally the government’s past actions and election manifesto considered to be the indicators for the future. Therefore, if investors find government optimistic on certain sectors then they start betting on the best possible stocks among that industry or sector, which further drives their prices.
On the basic level for everyone, the anticipated reforms and plans of the government drives the market sentiments. This is the only relation between the stock market and the general election. Upcoming election 2019 is a litmus test of BJP government. The biggest regulatory changes, tax reforms GST, Demonetisation have been carried by this government. Moreover, the export policies and other policies to boost small businesses are the key takeaways in the last 5 years. The biggest rating agencies like Moody’s as well as firms like Morgan Stanley are optimistic about India’s growth which is positive for the stock markets. Looking at the recent correction it’s a bit confusing that where would market lead. Analysis of historical numbers can derive this relation well.
General Election 2019 are not only important for BJP but also for all the stock market investor. The history shows that stock markets have always favoured with the stable government and good economic reforms. The best example for this is the market movements in 1991. In the election year (1991) markets, have shot up almost by 200% due to the good economic reforms and strong budgets. The same thing can be observed in 1999 which is a technological boom era where stock markets have appreciated very well. It’s not only the election which drives the stock market rally at the same time the decisions made by the government are also important. This makes us crystal clear that elections have the material impact on the stock markets in the short run. But in the longer term, the decisions of the government and the economic growth matters more.