MUMBAI: The low voter turnout in the ongoing Lok Sabha 2024 polls as compared to 2019 seems to be worrying the Dalal Street, said analysts, who remain cautious. India voted in the fourth phase to elect representatives to the 18th Lok Sabha on Monday, May 13.
A total of 96 Lok Sabha seats went to polls on Monday across 10 states and Union Territories on Monday, including Bihar, Jharkhand, Jammu & Kashmir (J&K), West Bengal and Madhya Pradesh.
The markets, meanwhile, saw the S&P BSE Sensex and the Nifty 50 slip nearly a per cent each, with India VIX, the volatility gauge spiking over 14 per cent in intra-day deals.
Interestingly, on occasions of the earlier three phases of elections, the market witnessed similar volatility, with the NSE Nifty 50 taking a significant hit. Market experts attributed the spike in volatility (India VIX) to lower voter turnout for the polls, raising speculation over the victory margin of the ruling government.
From a short-term standpoint, G Chokkalingam, founder and head of research at Equinomics Research said the Sensex and Nifty stocks are relatively better positioned in terms of valuations than their mid-and small-cap peers.
“Investors are keeping an eye on the turnout in the ongoing polls and remain cautious amid the low numbers as compared to 2019. That said, they will give more preference to the government stability and the reform process that the next government undertakes. While the Sensex trades at a trailing PE of 23.25x, the small-cap index trades at 32.2x and mid-cap index trades at 30.8x,” he said.
The first phase of Lok Sabha polls 2024 took place on April 19. The Nifty plunged 1 per cent in intra-day deals, but eventually ended 0.7 per cent higher. The voter turnout, as per Election Commission of India (ECI) stood at 66.14 per cent, a drop of 4 percentage points (4ppt) over 2019.
In this backdrop, investors, suggests Gaurang Shah, senior vice-president at Geojit Financial Services should brace for volatility and sharper intra-day swings as the election process keeps the news-flow thick and fast-paced.
“For the markets to stabilise, India VIX needs to cool-off. Investors need to brace for volatility in the short-term. That said, the downside appears limited from the current levels. It is advisable to stay away from the markets for now and buy only on a dip. BFSI, cement, defence, power, auto, NBFC and FMCG are some of the sectors I am bullish on,” he said.
Foreign money exit
Foreign investors, too, have preferred to stay on the sidelines till there is clarity on who will form the next government and with how much muscle.
Another key factor driving the FIIs/FPIs out of Indian stock market, according to V K Vijayakumar, chief investment strategist at Geojit Financial Services is relative attractiveness of other equity markets across the globe, especially China.
Source: BS
