40 Year Election History: One Must be Ready for a Pre-election Rally in 2024

Analysis by: Apurva Sheth, Head of Market Perspectives & Research, SAMCO Securities
We are currently six months away from the General Assembly Elections and looking at the past data and the current market scenario it seems we
can witness yet another pre-election rally. The 10-year US bond yields cooling off could likely catalyze the FII inflows any time soon; helping the
market to rally. Market valuations are also at reasonable levels after the recent correction.

Why are we saying so?

Sensex has shown remarkable resilience amidst political chaos that have happened ahead of past 11 general elections held between 1980 to
2019. Within the six months before each election, the BSE benchmark has generated an average of 14.3% return over 39 years, highlighting the
stock market's ability to navigate and thrive in the middle of political speculation and changes.

1998 was the only year when Sensex recorded negative returns of 9.3%, while 2009 witnessed highest returns of 59.8% in the 6 months prior to
the elections.

Pre-election rally in the markets happen due to certain factors listed below:

1. Political parties generally talk of structural reforms that are likely to be implemented if they are elected to power. This lifts the market
sentiments.
2. Political parties boost consumption by spending on voters, injecting liquidity, and aiming to secure support, indirectly influencing the
markets.
3. Budgets declared in the election year and the preceding year prioritize pleasing the general public, and strategically aligning policies to
garner support.
4. If there's confidence that the election will result in a stable government, Corporates, FPIs and other investors are more likely to show a
positive sentiment.
5. All of the above factors have jointly led the market generally doing well across the election history of last four decades.

Sensex CP on 6
Newly Results Results Date Sensex Months prior Percentage
Incumbent Elected Elections Date Closing Price (CP) 6 Months Prior Date date Change
BJP* BJP 2019 23-05-2019 38,811.39 26-11-2018 35,354.08 9.8%
INC* BJP 2014 16-05-2014 24,121.74 18-11-2013 20,850.74 15.7%
INC INC 2009 18-05-2009 14,284.21 18-11-2008 8,937.20 59.8%
 BJP INC 2004 13-05-2004 5,399.47 13-11-2003 4,949.16 9.1%
BJP BJP 1999 06-10-1999 4,697.70 06-04-1999 3,569.47 31.6%
United Front BJP 1998 06-03-1998 3,708.58 08-09-1997 4,087.30 -9.3%
INC United Front 1996 23-05-1996 3,683.99 23-11-1995 2,944.18 25.1%
Janata Dal INC 1991 27-05-1991 1,317.90 27-11-1990 1,284.35 2.6%
INC Janata Dal 1989 04-12-1989 725.52 05-06-1989 725.14 0.1%
INC INC 1984 21-12-1984 271.87 21-06-1984 241.68 12.5%
JP* INC 1980 08-01-1980 122.14 10-07-1979 121.50 0.5%

*BJP= Bharatiya Janata Party, INC= Indian National Congress, JP= Janata Party

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