Explained: Why Nifty, Sensex rose after every Lok Sabha Election since 1999

Another reason for markets rising, irrespective of who wins, is that the election is a very big economic event in India's consumption-driven economy.

India’s key stock market indices, the Nifty and Sensex, showed a rise six months after all the four Lok Sabha elections between 1999 and 2014, compared to the previous six months, according to an IndiaSpend analysis.

We analysed Nifty and Sensex levels on three key dates--six months before the first day of polling (pre-election), the first day of polling (during the election) and six months after the first day of polling (post-election), over the last four Lok Sabha elections.

The Nifty and Sensex showed an average rise of 40.8% six months after each of these general elections, as compared to the previous six months.

The Nifty, short for the National Stock Exchange (NSE) Fifty, was launched on April 1, 1996, and represents the weighted average of 50 major Indian companies across 12 sectors that are listed on the NSE. The Sensex, short for the S&P Bombay Stock Exchange (BSE) Sensitive Index, which is an index of 30 major Indian companies listed on the BSE, was established in 1986.

Of the four Lok Sabha elections held after the establishment of the Nifty, two (2004 and 2009) saw the election of an Indian National Congress-led United Progressive Alliance (UPA) government. In 1999, the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) formed the government, despite falling short of a majority. In 2014, the BJP won a simple majority and formed an NDA government along with allies. In all four cases, both the Nifty and the Sensex rose.

The Nifty saw the highest rise after the 2009 elections, when the UPA government was re-elected. The index was at 5,142 on October 16, 2009, compared to 3,269 on the same day a year before--a 57.3% increase.

The Sensex, too, saw its highest post-election rise after the 2009 elections, going from 10,581 on October 16, 2008, to 17,323 on October 16, 2009--a 63.7% increase.

Note: For 1999 data, the first day of the election is September 5, 1999. Six months pre-elections and post-elections were March 5, 1999, and March 5, 2000, respectively

That the Nifty always rises post-election as compared to before and during elections, was also highlighted in a December 2018 report by Mumbai-based wealth management and investment banking firm Anand Rathi Wealth Services.

Business Standard