Friday, 22 November 2024
Friday, 22 November 2024
The market knows the best, goes the adage. So, does the market sense a BJP victory in the Assembly elections in Maharashtra, the results of which will be declared on Saturday?
India’s benchmark equity indices rebounded on Friday, with the Sensex climbing a whopping 2.54 per cent to reclaim the 79,000 level, driven by across-the-board rally and value buying at lower levels.
Strong buying by domestic institutional investors and a firm trend in the US markets also helped the indices, traders said.
This was in contrast to the slump on Thursday (BSE benchmark Sensex tanked 422.59 points or 0.54 per cent to settle at 77,155.79) as Adani group stocks plummeted after billionaire industrialist Gautam Adani faced US charges of alleged bribery and fraud.
Besides, unabated foreign fund outflows and weak trends in Asian and European peers also dragged benchmark indices lower.
So, does this uptick in the equity market signal a BJP victory?
“Market sentiment was buoyed by exit polls from the Maharashtra election, indicating a likely victory for the Mahayuti alliance.....seen as a positive signal for renewed government-led capital expenditure initiatives,” Vishnu Kant Upadhyay, AVP, Research and Advisory at Master Capital Services, was quoted as saying in a report by Business Today.
But a research paper, titled ‘Impact of Election Result on the Stock Market, an Analysis of BSE (SENSEX) and NSE (NIFTY) Indexes,’ by two academics from the Central University of Karnataka, published in 2020, states: “...there is no significant relationship in the announcement of election results and performance of the stock market. Stock Market reacts abnormally to the information and brings anomaly for a short period and corrects itself in subsequent days.”
Earlier this year, the alleged correlation between the equity market and the elections led to a major controversy during the Lok Sabha polls.
Congress leader Rahul Gandhi had accused Prime Minister Narendra Modi and Union home minister Amit Shah of orchestrating a stock market scam right after poll results were out.
“Why did the PM and Union home minister give specific investment advice to the five crore families investing in the stock market? Is it their job to give investment advice? Why were both interviews given to the same media owned by the same business group which is also under Sebi investigation for manipulating stock,” Rahul Gandhi had said right after the Lok Sabha election results.
He had also asked for a Joint Parliamentary Committee probe. The BJP dismissed his comments.
Below were the two statements made by the PM and Amit Shah as India headed to the final phases of the Lok Sabha election.
“I can say with confidence that on June 4, as BJP hits record numbers, the stock market will also hit record highs.” Modi said on May 23.
“The market has nosedived in the past as well,” Shah had said in an interview with a television channel in the second week of May. “So one should not link it directly to elections. Anyway, some rumours may have fuelled it [the fall]. In my opinion, buy before June 4. The market is going to shoot up.”
Projections made by exit polls of the Lok Sabha results had sent stock markets surging with the NSE Nifty 50 and S&P BSE Sensex jumping 3.3 per cent and 3.4 per cent. The markets crashed to a four-year low after the results showed the BJP had lost majority on its own.
Most exit polls on Wednesday had predicted victory for the BJP-led Mahayuti alliance in Maharashtra, while some gave an edge to the Maha Vikas Aghadi (MVA) Opposition coalition in the western state that has the financial capital of India, Mumbai.
The saying in political circles goes that whoever holds Maharashtra holds the purse strings of India.
Among the exit polls, Axis-My India gave 178-200 seats to the Mahayuti and 82-102 to the MVA. Matrize predicted 150-170 seats for the BJP and allies in Maharashtra with a 48 per cent vote share, and gave the Congress and other allies only 110-130 seats with a vote share of 42 per cent.
Another exit poll, by P-MARQ, in Maharashtra gave the Mahayuti a total of 137-157 seats and the INDIA bloc’s MVA 126-146 seats with 2-8 seats to others.
So, does the market know something about the Maharashtra elections? We will know on Saturday.
