The Pattern of Indian PSU Stocks: A warning for investors ahead of the Lok Sabha elections 2024

financialexpress.com:

As India gears up for yet another Lok Sabha election in 2024, investors find themselves at a familiar crossroads. The phenomenon of Public Sector Undertakings (PSUs) witnessing a surge in stock prices leading up to elections, followed by a subsequent correction, has been a recurring trend over the past two decades. Examining the data reveals a compelling pattern that investors should take heed of before making their next move.

For the previous 20 years, there has frequently been a noticeable increase in PSU stock prices in the lead-up to Lok Sabha elections. Expectations of continued policies or changes that could help these government-owned businesses are usually what drive this spike. Buoyed by confidence, investors rush to these equities expecting advantageous contracts and policies from the government.

Post-Election Correction: Nevertheless, this hopelessness is frequently fleeting. Reality sets in once the election results are declared and the new government takes power. PSU stock prices may see a significant fall due to changes in policy, economic reforms, or even just a change in investor attitude. The exhilaration that fueled price increases gives way to uncertainty, which forces investors to reevaluate their holdings and occasionally make quick exits.

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As India approaches the 2024 Lok Sabha elections, history seems to be repeating itself. In recent months, several PSU stocks have experienced a significant surge in prices, reminiscent of previous pre-election rallies. Companies across sectors such as energy, banking, and infrastructure have witnessed heightened investor interest, driven by speculation and political expectations.

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