For Dalal Street investors in India, general elections are pivotal moments marked by early trends, opinion polls, and exit polls that provide valuable insights into potential outcomes.

This time, the election has assumed greater importance, driven by India’s escalating significance in geopolitics, its prominent stature in emerging markets, and the government’s ambitious aim to propel India to the world’s third-largest economy, up from its current fifth position.

These dynamics underscore the significant impact the upcoming election could have on various sectors and market sentiments.

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Investor Sentiment:

• Investors seem confident about a third term for the current government led by Prime Minister Narendra Modi.
• Fisdom Research predicts a comfortable majority for the BJP-led government, anticipating a continuation of their previous agendas.

 
Market Performance:

• Despite global challenges and high valuations, the Nifty 50 has only risen by 1% in 2024.
• Foreign investors exited Dalal Street due to these factors, but domestic institutional and retail investors’ unprecedented inflows have cushioned the market.

 
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Inflows Data:

• Domestic institutional investors (DIIs) poured in Rs 52,354 crore into equities in the first two months of 2024.
• Foreign institutional investors (FIIs) sold stocks worth Rs 31,827 crore during the same period.

Historical Trends:

• Historical data suggests that the Nifty 50 has ended positively three months into election results, with an average gain of around 11% in four out of five general elections.
• The maximum gain of 25% was recorded during the 2009 elections, while the minimum gain of 8% occurred in 2019.

 
Asset Allocation Strategy:

• Money managers recommend shifting towards large-cap stocks due to frothy valuations in mid-cap and small-cap segments.
• Canara Robeco Mutual Fund’s Head of Equities, Shridatta Bhandwaldar, finds more value in large-caps compared to mid- and small-caps.
• Neeraj Gaurh of Axis Securities suggests multi-asset allocation to diversify portfolios instead of focusing on highly-concentrated small-cap investments.

 
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