Mint Explainer: What's in store for investors during and after the election?

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Mint takes a close look at what's in store for investors in the coming weeks and months following the ongoing national election, how the market behaved before and after previous elections, which sectors could shine after the poll results are declared, and how domestic and foreign flows will be affected. With the market already having factored in policy continuity, there's a sense that investor anxiety is low this time around.

“The pre-election rally started in earnest after the assembly election of November 2023, with investors having faith that the current government will return to power," said Viral Shah, senior executive vice-president and head of brokerage at 360 ONE Wealth. The Nifty 50 index, which was trading in a wide band of 16,000 to 18,800 points, broke free and posted double-digit returns in a short span of time, he noted.

Over the past month the index has risen by 2% despite regulatory scrutiny in the broader market acting as a dampener. “While the market seems to be discounting the election outcome, anticipating policy continuity, it still needs to be wary of earnings momentum, which could undermine the overall optimism," said Kranthi Bathini, director, equity strategy, at WealthMills Securities.

Having said that, there could be some profit-booking given that several sectors are priced to perfection. Any slippage on Parliament seats for the NDA in the election could also dampen investors' spirits.

For now, according to Kotak Institutional Equities, the NDA is projected to win 366 seats in the ongoing election, up from 354 in 2019. The India VIX volatility index—considered the market's “fear gauge"—rose in the month leading up to the elections in 2004 and 2009, and dropped sharply ahead of the 2014 and 2019