India’s elections are fast approaching and the country’s next government is likely to be announced in just few months. Therefore, the focus has now been turned to sectors which can benefit from Lok Sabha Elections 2024. With 2024 being tagged as the year of general election, equities might see significant volatility. Thus, its quite normal to be anxious about the portfolio with elections around the corner. Isn’t it?
Well, we believe that investors who remain invested even during election time are ones who can generate healthy returns. With so much uncertainty, investors are required to believe that there are only handful of sectors which can benefit from Lok Sabha Elections 2024.
However, cooling off of oil prices together with strong earnings potential of the companies operating in India exhibit that Indian companies have a favourable outlook for 2024.
Trends seen in the history: Will these repeat?
If history is any indication, markets exhibited significant volatility in run-up to elections. However, post-election periods have seen some stability as clarity emerges and people try to adopt the political landscape.
Significant volatility is seen just before election. Experts believe that this pattern is specific and tends to get repeated election-after-election. More often than not, volatility in general election starts ~3 months before election dates and it tends to increase as and when media begins to release statistics and speculations related to winners and losers.
Analysis of all general elections since the year 1980 exhibits that incidences related to negative returns happen only one in 6 months through to election results day. As per the data, 1998 was the only year in which Sensex saw negative returns of ~9.3%, with 2009 seeing highest returns of ~59.8% in just the 6 months before the elections.
Sensex exhibited significant resilience around the political chaos which have taken place ahead of the previous 11 general elections, which were conducted between 1980 to 2019. In 6 months before conducting each elections, BSE benchmark saw an average return of ~14.3% in the previous 39 years.
This exhibits that India’s stock market has ability to navigate and be resilient in middle of political changes and developments. On YTD basis, the Sensex has risen by ~2% amidst political news about India and the US presidential elections.
Sectors which benefits from Lok Sabha Elections 2024
While there are certain sectors which can benefit from Lok Sabha Elections 2024, there are specific sectors which should be under investors’ watchlist. Firstly, agriculture and FMCG sector might see positive momentum. Why is that? Let’s explore!
Since ~2/3rd of India’s population continues to reside in rural part of India, efforts to win rural votes might result in an infusion of significant liquidity in rural economies due to increased spending by all the political parties.
This should act as significant catalyst to ramp up rural consumption demand which was missing over previous few quarters mainly because of below-average monsoon, El-Nino impact, downturn in agri-commodity prices, and finally, increased inflation.
As a result, rural-focused industries like FMCG, tractor and agri-equipment manufacturers should see some momentum and should find a place in investors’ watchlist. Indian agriculture’s market size should be able to reach US$473.72 billion by the year 2029, and should compound at ~4.90% between 2024-2029.
Some industries are expected to benefit from the temporary demand spurt at the time of elections. One such industry travelling industry because large amount of population tends to travel back to their respective native place so that they can cast a vote. More often than not, this coincides with summer time when there is increased demand for tourism. Share of Indian Hotels Company Ltd went up by ~7% in just 5 days.
Another industry which should remain in focus is Media industry. This is because political parties tend to use such platforms to reach larger audience which boosts their ad sales.
Industries which are everyone’s favourite, irrespective of election results
Amidst significant volatility in the equity markets, there are some sectors which can provide some resilience to investors’ portfolios. First of all, Power and Green Energy is one of the industries expected to see strong momentum once the election results are out as all the contesting parties are expected to make efforts to expand this industry.
Research says that India continues to target ~500 GW of renewable energy installed capacity by the end of 2030. The country expects to produce ~5 million tonnes of green hydrogen by 2030 end. This is expected to be supported by ~125 GW of renewable energy capacity. India has approved ~50 solar parks having aggregate capacity of ~37.49 GW.
Healthcare sector is another sector likely to benefit in 2024 as the sector’s growth is dependent on value-driven research, integration of global supply chain and equitable access. As part of India@100 vision, pharmaceutical industry in India targets to reach US$130 billion by the year 2030 and US$450 billion by the end of 2047.
This growth is expected to be supported by integration with global pharmaceutical landscape and access to integrated healthcare.