What will it take to unsettle the markets? On Tuesday, the bourses side-stepped Lok Sabha election volatility to hit a significant milestone by generating $1 trillion in wealth in six months. The total market capitalisation of all BSE-listed companies hit $5 trillion, increasing by more than $633 billion since January this year.
Dalal Street moved from $4 trillion on November 29, 2023, to $5 trillion on May 21, 2024, at a breakneck speed. Despite this, there is a sense of unease as foreign institutional investors sold over Rs 20,000 crore in Indian equities in May alone.
“Except for the Covid bump, volatility has been relatively low over the last 12-odd years. The question is, will it continue to be the same or shoot up?,” Zerodha co-founder Nithin Kamath said in a post on X as India nears the big verdict on June 4.
A user attributed the calmness to SIPs. “Robust monthly sips have hooded the markets, MF withdrawals can only create a trigger,” she wrote. Another voted for caution. “Volatility is an inherent feature of financial markets, shaped by a myriad of factors ranging from economic indicators to geopolitical events. While the recent period of stability has been welcomed, it’s wise to remain prepared for fluctuations and adjust investment strategies.”
Prime Minister Narendra Modi and home minister Amit Shah had recently played down the market uneasiness over elections. According to ICICIdirect, Nifty has historically corrected 6 per cent during polling phase in past four elections and three times hit new highs around election outcome.
International research firm Bernstein sees a short-term rally leading into elections or the week after June 4 that could push Nifty beyond 23,000, adding that the rally may be led by “infrastructure, manufacturing, and a bit of financials.”
Nomura India said its base case assumes opinion polls are correct i.e. the BJP retains power, securing a simple majority on its own. The result, it said, would likely calm investor nerves, ensure policy continuity and support macro financial stability.”
Equichain Wealth Advisors said the market will be driven by news and sentiment on general election results, exit poll and probability of winning margin of BJP/NDA in the next two weeks.