Stock Markets are majorly driven by events. Events such as Elections, Wars, Policies and GDP data will drive the market. As we are aware that, general elections are to be held in this Year, many investors and traders are worried about their portfolios and their performances.
Let’s have a look on the relationship between Stock Market and General elections.
How Does the Market Perform Before Elections:
Before the Elections, Market Participants will be very Cautious, they will be looking for different sources to get information regarding election outcome. Investors will think twice before investing as there will be anxiety regarding election results. Mostly, Market will be muted as there will be less infusion of funds from the Market Participants.
FII and DII Participation will be less compared to normal sessions, as they will be cautious to know the new economic policies of the Elected Government. Exit poll Surveys will provide a guess, which Political Party may form the Government.
Factors that Influence the Investors Mindset:
During the Election Year, there will be Uncertainty in the Stock Market as Investors will have anxiety regarding the Outcome of the Results.They are Certain factors that will have an impact on Investors Decision.
Manifesto of the Political Parties:
Manifesto of political party will provide an information regarding their policies and Schemes. In many Cases, these manifestos will have an impact on individual stocks, rather than the Stock Market.
For Example, if a party announces the ban of alcohol in their manifesto, then stock related to alcohol will have a major impact.
Ideology of Government to be Formed:
Ideology of government is biased on the Political Party forming it. They are political parties which focuses on Welfare schemes rather than development and Infrastructure. Depending on the ideology of government, they will be movement in the Stock Market.
International Affairs and Relations:
International affairs and investments are very crucial to attract the foreign investments and to safeguard the Trade relationship with the international entities.
How does the Market Performs during and After Elections:
During the election period, Stock Market will be very Volatile and will react to small Events and News. Mostly, Investors and Market participants will be very cautious and will be trying to safeguard their portfolios. Let’s see how market have reacted to the election results.
It is to be noted that, if same Government is formed their will be a higher probability of Stock Market Moving Higher, as the government will continue the Economic policies and especially the government Contracts to the Companies will be Continued.
Conclusion:
As an Investor, it has to be noted that whichever Government may form, Economy has to move in Higher Trends. Events are the driving force for Stock Market, which give an opportunity to enter and exit the portfolios, depending upon the outcomes.
As Indian Elections are to be held in May and US elections are to be held in November, there might be a roller-coaster in the Stock Market. US Elections and policies will have a significant effect on Indian Markets, investor should be very Cautious and timely active on the Outcomes.
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