Tall claims by Prime Minister Narendra Modi and Home Minister Amit Shah, predicting an unprecedented rally in the stock markets post-June 4, have failed to soothe investors’ nerves, with the India Volatility Index (VIX), a widely tracked sentiment gauge to measure the expected volatility in the stock market, shooting from 10.20 on April 23 to 21.69 on May 22, an increase of 70.73 per cent in the past month alone.
As benchmark indices –Sensex and Nifty– dropped 1 per cent in May, the BJP’s top political leadership jumped in to allay investors’ concerns around uncertainty in the continuation of the ruling government. Analysts have linked multiple bouts of volatility in the past six weeks to low voter turnout in the ongoing Lok Sabha elections. The fear is that a lower voting percentage might dent the ruling BJP’s performance and drag its tally to 300 or lower.
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PM Modi said in an interview that programmers who operate the stock market will become weary with the kind of action expected on June 4, the day the Lok Sabha election results will be declared, adding that the NSE and the BSE will set new records in the week the election results are announced.
A few days ago, Home Minister Shah had suggested that investors should buy before June 4 as the markets would rally after the election results are declared and the BJP returns to power for a third consecutive term.
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Now, poll strategist-turned-political activist Prashant Kishor has predicted that though the BJP-led NDA was largely expected to return to power, investors may choose to punish the party if it fails to live up to the targets it has set for itself.
In an interview with NDTV, Kishor credited the BJP for successfully changing the electoral discourse to its target of 370 seats from the halfway mark of 272 required to form a government. However, the same strategy could also come back and haunt stock markets if the BJP fails to meet its own claims.
“When the expectation from a company is very high and they do not meet that despite performing well, the stock market punishes them. From this point of view, if the BJP scores less than 370 seats, this may become a talking point. The markets too may reflect this,” Kishor said, adding that he expects the BJP’s return to power with a clear majority in the ongoing Lok Sabha elections.
“Status quo or a status quo with a positive bias in favour of the incumbent is expected. I see little chance of BJP’s score going down,” he said.
Kishor’s remarks come amid heightened volatility in Indian stock markets as the Lok Sabha polls gained momentum. Investors also saw reports of a lower voter turnout as an indication that the results may not be in line with what the opinion polls had predicted.
In the 2019 Lok Sabha elections, the BJP won 303 seats, a massive jump from its tally of 282 in the 2014 general elections. Opinion polls had predicted that the BJP may win 370-410 seats this time. The grey market, however, expects the BJP’s seats to settle in the 290-310 range.
The results to the Lok Sabha elections are scheduled to be declared on Tuesday, June 4.