Lok Sabha exit poll on June 1: Here’s your handbook for stock market strategies

Lok Sabha Exit Polls 2024 and Stock Markets: While the jury is still out on who will win the 2024 Lok Sabha elections in India and how many seats will form the next government, for their part, the markets have been volatile throughout the seven phases of the Lok Sabha polls .

India VIX, a gauge of stock market volatility, fluctuated between 10 and 21 levels during most of the seven phases of India’s Lok Sabha 2024 elections, data showed.

When will the Lok Sabha 2024 exit poll be announced?

The Lok Sabha exit poll is likely to be announced after the completion of all seven phases on June 1. Political experts expect the outcome of the exit poll for the Lok Sabha 2024 elections to trickle in on Saturday, June 1, at 7 pm.

But why are the stock markets closed on the day of the exit poll on June 1?

The Indian stock market will remain closed on Saturday and Sunday, June 1 and June 2. The Indian stock markets trade five days a week, Monday to Friday between 9:00 AM and 4:00 PM, including the pre-market and post-market (stock price and index adjustment sessions).

On Saturdays and Sundays, Indian stock markets will remain closed for trading unless the exchanges decide to open them up for a special trading session.

The last time Indian stock markets were open on Saturday was on May 18, when both the BSE and NSE held a special session to test their disaster recovery mechanisms. Previously, both exchanges remained open on March 2 for a similar purpose.

Will the stock market fall after the June 1 exit poll?

Analysts believe markets are likely to remain volatile ahead of the exit polls. Sharp swings are also expected on Monday, June 3, when markets open for trading after the exit polls are announced on Saturday, June 1.

While the link between election turnout and election results is not clear-cut, the fall in turnout so far has, analysts believe, introduced an element of uncertainty that has resonated in stock markets.

Who will form the government after the Lok Sabha election results? Will the markets crash after the exit polls of the 2024 Lok Sabha elections?

Or do they believe that the Narendra Modi-led Bharatiya Janata Party (BJP) and its allies, collectively known as the National Democratic Alliance (NDA), will form the next government?

Markets, according to analysts, expect the NDA to form the next government, although the margin of victory in the Lok Sabha polls and the final number of seats in the 2024 Lok Sabha elections for the NDA versus the INDIA alliance are still a matter of debate. What the markets are looking for is a stable government and policy continuity.

“Based on opinion polls, markets expect the NDA political alliance to secure a third term, with the BJP likely to retain its one-party majority. This expected political stability should ensure policy continuity and support market sentiment and India’s valuation premium,” Premal Kamdar of UBS Securities wrote in a recent note.

On the other hand, unexpected results, Kamdar said, could trigger knee-jerk reactions in equity markets in the short term, with stock valuations potentially testing pre-NDA levels. Significant weakness in the stock could provide buy-on-dip opportunities for investors, he said.

Historically, any market underperformance due to election results tends to reverse in the medium to long term, as markets and companies adapt to new government policies.

“We expect equity markets to open on June 3, disregarding the exit poll result and proposing a cautious approach, especially this week. Investors may be sitting on a significant amount of cash to be conservative and deploy it for post-election outcomes. In fact, it is worth paying a premium to buy the stock as we believe the bull run will continue after the election results are taken into account and any knee-jerk reactions are observed,” said G Chokkalingam, Founder and head of research at Equinomics Research.

First print: May 28, 2024 | 8:04 am IST