Of polls and pole positions: Market trend shows largely stable trading when India votes

India is now the fifth-largest globally with a market cap of around $4.2 trillion, trailing the US, China, Japan and Hong Kong.

By all measures, 2024 looks like a watershed year. Markets marching towards record levels. The broader economy has shown signs of staging a smart rebound. Footfalls are back in shopping malls and neighbourhood arcades.

Importantly, arguably the world’s biggest elections are taking place in India.

India is now the fifth-largest globally with a market cap of around $4.2 trillion, trailing the US, China, Japan and Hong Kong.

There’s an unmistakable excitement and optimism about India, even at a time when large parts of the developed world stare at a shaky forecast. The markets have given a 70,000-plus booster short to India’s $5 trillion goal. The potential is now well-acknowledged.

The question everyone is asking is how much of the Lok Sabha elections in April-May this year will be a major determinant for the markets and the economy’s direction?

The past can be a useful gauge to analyse this. The statistics over the last 25 years throws up some interesting trends.

In 1999, during September and October 3, when the elections were held, the BSE Sensex fell 0.2 per cent. On October 6, when counting began (this was a mix of paper ballots and electronic voting machines), the Sensex fell 0.2 per cent.

In 2004, during the course of the elections (from April 20 to May 10), the Sensex fell 4.2 per cent. On the day of the counting on May 13, it grew 0.8 per cent.

In 2009, when the Congress-led United Progressive Alliance (UPA) returned to power without the Left parties’ support, the BSE Sensex rose 6.5 per cent during the course of the elections from April 16 to May 13. On May 18, the first markets open day two days after the poll results were announced on May 16, the BSE Sensex grew 17.3 per cent.

Five years later, in 2014, during the days when the elections were held—from April 7 to May 12—the BSE Sensex grew 5.3 per cent. On May 16, when the elections were announced, the BSE Sensex closed 1 per cent higher.

In 2019, during the elections—from April 11 to May 19—the BSE Sensex fell 1.7 per cent. It also fell marginally (-0.8 per cent) on the day of the counting on May 23.

The equity markets have grown by several multiples over the last 10 years.

The Bombay Stock Exchange (BSE) market capitalisation has crossed USD 4 trillion recently, a nearly four-times climb from the levels of USD 1.1 trillion in 2014. The BSE Sensex has nearly tripled—from 24,000 levels in 2014 to more than 73,000 now.

Mutual funds’ assets under management (AUM) have more than 500 per cent from Rs 8.25 lakh crore to more than Rs 50 lakh crore now.

Funds raised in the private placement market have increased more than 120 per cent—from Rs 3.99 lakh crore in 2014 to Rs 8.82 lakh crore in 2023.

The Indian equity market added around 15.69 million investors in 2023, with Uttar Pradesh leading the pack with 2.31 million, outgrowing Maharashtra. Maharashtra, however, retains the largest investor base at 14.9 million, while Uttar Pradesh and Gujarat come next with 8.9 million and 7.7 million investors.

The heartland is also getting financially savvy. Digitisation of financial systems and deeper bank penetration is transforming people's savings behaviour, from locking up money in physical assets such as gold or stocking up cash, to more return-yielding financial assets.

Value of shares and debentures held by households jumped 1031 per cent during 2014-23—from Rs 18,930 crore to Rs 2,14,191 crore. Mutual funds’ assets under management have vaulted 378 per cent – from Rs 8,25,240 crore in 2014 to Rs 39,42,031 crore in 2023.

Savings deposits have galloped from Rs 20,05,441 crore in 2014 to Rs 59,58,755 crore—soaring by 197 per cent. A large part of this may have been driven by the PM Jan Dhan Yojana (PMJDY), the world’s largest financial inclusion scheme launched in 2014. In 2014, an estimated four out of 10 ten adults in India did not have a bank account. In January 2024, there were 51.50 crore PMJDY accounts, with Rs 215,803.17 crore lying in these accounts.