Amazon deals

Wednesday, May 25, 2016

How Election Results can affect Stock Market movements - a guest post

Recent results of elections in four states and one union territory threw up some interesting outcomes. Congress and its various alliances got a drubbing in all four states, though they managed to retain Puducherry.

BJP and its allies won Assam - opening their account in a North-Eastern state for the first time ever. They managed to marginally increase their seat share in West Bengal, and played spoilsport for the Left-Congress alliance in several more seats.

The strength of Congress in the Rajya Sabha will get reduced. In this month's guest post, Nishit explains why the results may be beneficial for the stock market and how results of state elections in 2017 can affect the market.

--------------------------------------------------------------------------------------------------------------------------------------------

Election results for four State Assemblies and one Union territory have been declared. Election results often influence the stock market because Government policies play a big role in the progress of the economy and as a consequence of which the market reacts.

In 2004, it was the fear of change, when the well entrenched NDA Government of Vajpayee was uprooted, and the market tanked. In 2009, it was relief that Manmohan Singh was back and would no longer require support from Communists. Similarly, in 2014, the Modi wave drove the market up.

Assembly polls do influence the market because they throw markers to the future. BJP consolidated its position during the recent state elections, and hence the market did not tank. If Assam was not won, then the market may have cracked.

There are no elections scheduled for the Assembly till about March 2017. At that point of time, the key states of UP, Punjab and Uttarakhand would be going to the polls. If BJP does badly, the market will tank and vice versa.

Election results are one of the influencing factors for the way the market moves and one must keep an eye on them. Market movements are merely effects and the underlying causes are many. An effective study of causes why the market moves as it does will help one make money.

The market rallied after state election results on May 19 '16 because Mamata Banerjee made the statement of supporting the GST Bill after results were out. The results also mean that in due course, Congress will be further weakened in the Rajya Sabha - enabling the NDA to pass important bills more easily.

Next year there will be two occasions when the market may get influenced by election results. In March 2017 with UP and Punjab and in late 2017 when Gujarat and Goa go to the polls. Imagine the scene should BJP lose in Gujarat!

--------------------------------------------------------------------------------------------------------------------------------------------

(Nishit Vadhavkar is a Quality Manager working at an IT MNC. Deciphering economics, equity markets and piercing the jargon to make it understandable to all is his passion. "We work hard for our money, our money should work even harder for us" is his motto.

Nishit blogs at Money ManthanYou can reach him at nish.stockid@gmail.com)

No comments: