80+ countries are holding elections in 2024. What does this mean for India?

– By Akhil Modi

It’s going to be the busiest election year, with over 80 countries worldwide expected to hold major elections in 2024. Bangladesh, Pakistan, Indonesia, Taiwan, Finland and 10 other nations have already held legislative elections in January and February. Here’s a look at what’s coming up and how it could impact India’s economic outlook.

Elections to Keep an Eye On in 2024

What Do These Upcoming Elections Mean for India?

While political uncertainty has traditionally been a key driver of the financial markets. But volatility could be unprecedented in a year when countries accounting for 60% of the global economic output and more than half the world’s population go into elections. In fact, JP Morgan has gone so far as to say that the US presidential elections and inflation will be the best influencers of global market moves in 2024.

But 2024 isn’t like previous election years, not just in terms of the number of countries holding elections but also because the US and UK elections will be held almost at the same time. Although there have been times when the two countries have held elections in the same year, holding elections within a couple of months of each other is unheard of. Therefore, we could see a high degree of market uncertainty this year.

However, remember that elections do not automatically mean massive uncertainty. There are opinion polls and analyst opinions that can help you stay informed of market expectations, the party or person expected to win, and what that could mean for your preferred investments. Plus, you know the policy agenda of the party pegged to win, which can give you insights into whether their win would lead to positive or negative market sentiment. Positive sentiment tends to make stock prices rise, while prices fall when sentiment turns negative.

For example, factors like tax cuts usually lead to positive sentiment. We already know that Donald Trump, the US presidential hopeful, favours tax reductions and protectionist policies for American corporations. This could bolster the stock market. On the other hand, his last stint as president led to the US-China trade war. His stance on Russia is also very different from that of Joe Biden, the other contender for the election. Analysts believe that “Trumponomics” could strengthen the dollar since Donald Trump tends to prefer higher tariffs to balance out Chinese imports.

It is also important to look at historical market data. Research on the response of financial markets in 33 countries, including the UK and US, found that the markets tend to give higher returns before elections. The Indian markets, in particular, have remained resilient even during the most challenging times, with Indian stocks hitting record highs through the Federal Reserve’s aggressive interest rate hike campaign and monetary tightening by the RBI. Now that the worst of the interest rate hikes across central banks worldwide is likely over, it could bode well for the markets.

In India, there are widespread expectations that Prime Minister Modi would win his third term in 2024. His focus on infrastructure investments and “Make in India” are expected to fuel growth. In fact, Goldman Sachs believes that policy continuity could lead to 15% growth in corporate profitability in FY24 and 14% in FY25. However, an election surprise could lead to deep market corrections.

How to Invest in 2024

The key to capitalising on market volatility is to keep an eye on evolving market data, breaking news and analyst opinions, supplemented by your own technical analysis. If you wish to ride out any volatility, analyse the company’s long-term fundamentals to make investment decisions, rather than resorting to impulsive trading based on short-term price movements. Portfolio diversification and agility in responding to market changes are the keys to minimising risks during periods of market uncertainty.

(Akhil Modi is the CA, Director – Digital Broking at BlinkX by JM Financial.)

(Disclaimer: Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited.)