Markets love coalition governments, says veteran investor Shankar Sharma

Shankar Sharma said that a switch from a majority government to a coalition government is not continuity by any stretch

Market seems to love coalition governments, observed veteran investor Shankar Sharma, citing market movements after the induction of governments over the past ten years.

In a post on the X platform, the founder of GQuant Investech posted: "Very interesting data. Please tell me your interpretation.

Sensex moves 1 week post LS results:
2014: +1% up
2019: +2.5% up
2024: +6.5% up"

In 2014 and 2019, Bharatiya Janata Party had won the majority of Lok Sabha seats of 282 seats and 303 seats respectively. In 2024, the party won 240 seats, which is short of the majority mark of 272; therefore, coalition government has come into power. On June 4, Nifty crashed to 21,880 and, over the week has recovered to 23,398.

Sharma added, "My interpretation: Market loves Coalition Governments."

Also read: Nervousness to linger in markets even if NDA forms govt, fiscal math a major focus: Shankar Sharma

Then he invited others to give their interpretation.

One of the X users suggested that it could be continuity that is delivering the rise in markets in 2024.

To this, Sharma said that the transition from a majority government to a coalition government cannot be called continuity by any stretch.

"It is completely discontinuous," he said.

Another user continued this by saying that policy-wise there would be continuity and Sharma pointed out that that would be difficult to know.

He wrote, "How do you know that, within 2 days of government formation? Even the government itself does not know!"

In an earlier interaction with Moneycontrol, Sharma had said that he expects markets to remain nervous even if NDA forms the government.

He had pointed out how the country grew no matter who was in power.

"Market rally in the past 3-4 years has seen fiscal deficit push growth. Our GDP is direct outcome of fiscal deficit, hence the government needs to review if it can run relatably high fiscal. We believe that India will grow irrespective of who is in power, even coalition govts have delivered growth in the past," Sharma had said.

He had said that foreign institutional investors (FIIs) cannot ignore the country in the long run, even if their sentiment "wobbles" for short periods.