Stock markets are all about ‘sentiments’, and elections play a key role in shaping the sentiments. In elections, political parties with widely different political and economic agendas clash. There is always slight fear making a home in the minds of the investors if the party being elected can be positive or negative to some businesses. Even the changes in economic views and strategies of same government or even ministers can change business prospects of different segments of the economy. Furthermore, there is fear in the stock markets that economic policies being executed up till now by the ruling party may stand changed if the new government arrives at the scene. It leads to a spike in market volatility and uncertainty rules the roost during this time period. The more voters feel confused about who the clear winner will be, the more stock markets are affected by this volatility.
The political hear is all risen as Karnataka goes to poll this coming week. Market experts believe that politics will prevail over economics on the Sensex, Nifty as India’s Silicon Valley sets the tone for a series of state elections running up to the 2019 general elections. Some 2,655 candidates will be in the fray for the 224 seats in the Karnataka assembly in a multi-party election, whose results will be out on May 15. Bharatiya Janata Party (BJP), Congress and Janata Dal-Secular (JDS) are the major parties clashing in the state.
What should investors do?
Investors should not let political changes and market volatility change their investment decisions. One should remain invested in the stock markets for a long run, especially during times of uncertainty. The best option is to allow the portfolios to naturally fluctuate and not try to time the stock market.