For the Indian stock markets, 2024 has been a landmark year. There are quite a few reasons for this, but one primary reason has been the peaking out an unprecedented bull run and the equally matchless hiccup that the markets had after the general elections in May.
One of the most remarkable jolts that the markets got this year was the Lok Sabha polls. Any general election directly impacts investor sentiment since it shapes the economic policies of the country for the next 5 years. All the policies that matter for the broader economy, stock markets, banks, insurance, commodity, bullion, manufacturing, services, agriculture and export can be heavily influenced by the election results.
General elections of 2024
The results of the Lok Sabha polls 2024 were announced on June 4, 2024. In the apprehension that BJP might lose power, the markets tanked. Investors had their eyes fixed on opinion polls and exits polls for cues. When trading was closed Sensex had dived 4389.73 pts or 5.74% and closed at 72,079.05. A bigger fall of 5.93% (or 1,379.40 points) marked Nifty 50 that ended the day at 21,884.50. However, the bounce back was also dramatic. On June 5, when it became clear that BJP will claw back into power under the leadership of Narendra Modi, investors began returning and the Sensex jumped 3.20% (or by 2,303.19 points) to reach 74,382.24. Nifty took a higher leap at 3.36% and closed the day at 22,360.25, putting the bloodbath a day earlier behind it.
After it Narendra Modi took oath and announced that despite the government being dependent on two parties for support, his government will remain unwavering in its pursuit of economic and administrative reforms, the indices kept up the northward journey. With the Union budget indicating major to infrastructure, sectors such as construction, steel, and cements emerged as major beneficiaries.
What happened in 2004 and 2009
Significantly, in 2004 the markets tanked after the results while in 2009, it rose. The crash in 2004 is attributed to the victory of the UPA that defied expectations of many analysts. As it became clear that Left parties will support the coalition government, the market tanked even further. It took the markets a few months to return to pre-poll level. However, the markets reacted positively to the results of 2009 poll results. UPA came back in power and indices rallied both during the polls and first trading session following the results were declared.
The end of the bull run
This year the Sensex posted a remarkable rally of 20% when it was at a high. Nifty 50 rose by even a higher degree. But 2024 was also the year when the liquidity-driven bull run also came to an end. While investors were wallowing in the bull run, the bulls made merry in October, when FIIs (Foreign Institutional Investor) began selling heavily in October and November.
As in any stock market, the meteoric rise of the markets carried the seeds of the fall inside it. As the liquidity surge pushed prices up, valuations gradually became a concern for investors. The fall of the rupee against the dollar and the injection of economic stimulus package by China to the tune of $1.3 trillion and lacklustre earnings by corporates led to a situation where the FIIs began selling heavily in October and November. The selloffs recorded in these 2 months by foreign investors touched Rs 94,017 crore and Rs 21,612 crore respectively. For the record, Sensex had a historic high of 85,978.25 points while Nifty marked a high of 26,277.35.
FII selloff
According to reports till December 22, the sectors where FIIs sold the most are financial services, oil and gas, FMCG, automobiles and components, construction, metals and mining etc. Though the correction brought the markets at lower levels and some investors, including FIIs, began returning to the markets, heavy selling pressure marked the week between December 16 and 20 when the broader indices fell by about 5%. Another pressure came from the falling rupee as it added to the FII outflow and as the outflow rose, in turn, it helped to pull down the rupee further against the dollar.
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