Sushil Kedia shares a trading strategy that commands 90% strike rate for gains

Sushil Kedia advocates a strategic investment approach around elections, citing historical data to support the efficacy of buying stocks 15 days prior to and after election outcomes.

Market veteran Sushil Kedia believes that buying stocks 15 days before the election and selling 15 days after is a no-brainer strategy. In a recent interview, Kedia drew on data from the past four decades to highlight this recurring pattern. "Except on one occasion in 2004, when Vajpayee ji's government did not get re-elected, the Sensex has risen after elections nine out of ten times," he noted.

Considering the Nifty has had a one-way rise since May 9 and reversed direction after touching a new high on May 23, the current weakness is a good entry point, he pointed out. Currently, the Nifty is hovering around 22,600, the same level as it was on May 20 (15 days prior to June 4, the counting date).

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Kedia emphasized that this strategy is statistically robust. "Fifteen days before the election outcomes, if you go long and stay on for another 15 days after the results, you make money nine out of ten times," he explained. The only exception was the 2004 elections, where the market reacted negatively to the unexpected loss of the incumbent government. However, the downturn lasted only three days before recovery began.

He pointed out that the market's initial reaction is often driven by uncertainty and perceived risk, but this is typically short-lived. "There are no permanent love affairs in business. Markets will discover a new love," Kedia remarked, alluding to the resilience and underlying strength of the Indian economy. He noted that despite global economic challenges and demographic shifts, India's fundamentals remain robust.

Kedia attributed part of this phenomenon to human psychology. "People generally have a tendency to be more cautious and worried than what actually plays out in the world. This collective pessimism makes it rewarding for those who do not participate in this pessimism," he said, drawing a parallel to the insurance industry's profit model, where risks are often overestimated.

Reflecting on the past ten elections, Kedia stressed that those who remained calm and objective during market fluctuations benefitted the most. "Whether you bought 15 days before the election results or at any panic after the election results, nine out of ten times you made money," he asserted.

About the current market scenario, Kedia said that any near-term panic could present a buying opportunity. "If in the next three sessions, I find any panic coming in and reversal patterns happening, I would allocate risk to stocks showing potential for significant moves over the next three, six, or twelve months," he advised.

He emphasised the need for traders to be disciplined in investing, especially around large events which can be more volatile due to retail overexposure. "Those with cash in their pocket and discipline inside their heart should see market nervousness as an opportunity to buy," he said, underscoring the potential rewards of staying objective and strategically positioning investments around election times.