Here’s How Markets Have Performed During Elections

Sentiment towards Indian equities has been fragile as foreign investors pulled out money amid the political uncertainty and the risk off mood triggered by the U.S.-China trade standoff.

However, investors can take heart from the fact that all benchmark indices in the past have returned gains in the six months following the election results.

The India NSE Volatility Index—which indicates the expected market volatility over the next 30 days—had surged to 2014 levels on a monthly basis before the exit polls.

In the past two decades, the Nifty 50 has risen between 9 percent and 20 percent in six months after the results announcement. So far in the last six months, the Nifty 50 has gained as much as 11 percent.

Along with the benchmark, the midcap and the smallcap indices have also generated returns for investors after the results were announced. In 2009, both the indices gained the most as the United Progressive Alliance government was re-elected for the second term. So far in the last six months, both the indices have gained in the range of 1-4 percent.

The Nifty IT index is the only sectoral index which has gained before and after the announcement of election results in the past. The index has gained in the range of 27-161 percent six months after the results were announced in the last four elections. The index has gained close to 12 percent so far in the last six months.

The Nifty Bank index has so far declined only once after the election results were announced in the six-month period. The index, however, has gained in the last two elections.

Back in 2004, the Nifty Auto Index not only fell in the six months to election results, but also declined marginally six months after the poll verdict. The index has so far dropped about 8 percent.

The Nifty FMCG Index has gained after the poll verdict in the last three elections. In 1999, however, the index dropped a little over 7 percent six months after the results were announced. The index has gained nearly 4 percent so far in the last six months.

The Nifty Metal Index has risen after the election results in the last three polls. The index has dropped 12 percent so far in the last six months.

The Nifty Realty Index, which was created in 2008, has gained in the last two elections after the results were announced. The gains were in the range of 5-15 percent. The index has risen close to 18 percent so far in the last six months.

The Nifty Media Index, which was created in 2006, has managed to gain close to 26 percent in the last two elections after the results were announced. So far in the last six months, the index has lost 9 percent.

The Nifty Pharma Index had consistently risen after the election results were announced in the last three instances. The gains ranged from 5 percent in 2004 to 45 percent in 2014. So far in the last six months, the index has declined about 8 percent.