Indian stock market ready for pre-election rally ahead of 2024 polls

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Track assembly election results here S&P Global Rating has raised India's GDP growth forecast for the FY24 from 6.0% to 6.4%, instilling optimism across the broader market. The heightened confidence suggests that the Nifty50 could comfortably breach the psychological barrier of 20,000 and retain these gains for long-term support. The bold performance of the global markets and IPO listings is adding glitter to mid & small caps.

The conducive backdrop, shaped by improvements in both the global and domestic environments, sets the stage for a pre-election rally in India. Also read: SBI, M&M, Axis Bank to L&T - Motilal Oswal recommends 14 stocks to buy after BJP win in assembly elections India anticipates sustained healthy government spending, particularly benefiting the rural market. Crude prices are falling, which is an advantage for India fiscally.

Pre-election polls suggest a seamless continuation of the reform rally without major disruptions, although there is a concern that the number of seats may be lower compared to 2019. However, drawing from historical track record, suggests robust pre-election returns, reinforcing the potential for a rehearsal rally. A national election outcome has never impacted the long-term rally of India.

Rather, any short-term volatility observed tends to be limited to a period of less than three months, particularly in cases of surprising or hung parliament results. Pre & Post election data below, excluding the 2009 period, where India benefited a lot from the post 2008 global crisis rally, shows that the domestic market has provided a healthy pre-election rally of an average of 18% for 6 months and 8% for 3 months. And post rally of average 2% in 3 months and 10% in 6 months.