Political change and stock market movements

Experts believe the share market will pause for sometime after a considerable rise during the Lok Sabha election campaign period. Investor focus is now going to swing towards other economic issues as well as corporate results. Rupee’s appreciation will lower the profits for many companies even when the economic situation is starting to improve in the US and other countries.


Performance by IT Companies

Many of the leading IT companies such as Infosys have already mentioned that performance of this quarter is not expected to be good and the same has been said by TCS as well. Due to this subdued scenario in IT sector, the index went down by 9% last month. Some of the main reasons for this decline are almost 3% increase in rupee’s value last month as well as Infosys remarks of low profile performance for the 4th quarter.  Even then market is confident about demand outlook is good, what is concerning is the strong appreciation in rupee value.


Rupee appreciation and IT Stocks

As per market experts, the IT stocks will be under pressure but over a period of 1 to 2 years, positive returns can be expected. Refining margin will give positive results to Reliance Industries but overall it is going to be subdued performance due to weakness predominant in petrochemical products. If we check the year-on-year data for the quarter then we will find that there has been a thirty-one percent improvement in aggregate earnings in the present quarter.


Elections and investor reaction

The stock market is on the rise ever since the Lok Sabha poll campaigns started and main reason being interest of foreign investors anticipating a stable government at the center after the elections are over in the country. However, many think that this rise is overdone. Poll forecasts anticipating that Modi will take BJP to an overwhelming win may fail as has been seen many times with such forecasts.

In case BJP does not get majority votes and has to rely on regional parties for support then he will not have a free hand in development projects he may want to undertake and thus stall the development process altogether. Even if development process starts, it will take considerable time for its effects to start coming in.


Thus, there are several hopes that this election is bringing along with it. Investors are expecting a change in government at the center and formation of government by BJP. Under the leadership of Narendra Modi, India may well see development, as he was able to implement in Gujarat but whether it happens or not is yet to be seen.

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