Can the 2024 Lok Sabha elections trigger a Sensex rally this year? Here's what history shows

livemint.com:

benchmark NSE Nifty 50 Index has climbed in the six months leading to the vote in each of the past five elections, posting an average 16 percent return during the period, data compiled by Bloomberg show. Gains in the three months after the polls have averaged more than 3 percent. Prime Minister Narendra Modi faces a test in five state polls this month before the nationwide contest in the summer of 2024.

As elections draw near, the government may increase spending to support consumption and boost sentiment, JPMorgan Chase & Co. strategists said in a note last month, while upgrading local equities to overweight. “Investors tend to favor continuity of the government that has a majority," said Vijay Bhambwani, a Mumbai-based proprietary trader.

“For now, the sentiment on the street suggests that this pattern is likely to repeat." Modi remains popular in India, according to a recent survey, and is expected to extend his decade in power. Still, his Bharatiya Janata Party may lose ground in the five local polls, an outcome that will affect market sentiment, according to Antique Stock Broking. “This is then likely to present a good entry point," analysts led by Pankaj Chhaochharia wrote in a Nov.

3 note. Local poll results “are not a good barometer" of the national election and the BJP is likely to retain power despite the “projected weakness" at the state level, they said. To be sure, expensive equity valuations and global headwinds underpin the market’s expectation of Modi winning a third term.