Volatility has risen as Lok Sabha Elections 2024 fever grips the stock market; will polls halt the rally?
stock market has dissipated. In the past three weeks, India VIX, a widely tracked fear gauge measuring the expected volatility in the stock market, has shot up from 10.15 on 23 April to 20.6 on 13 May. The heightened volatility stems from concerns over lower voter turnout in the ongoing general elections, potentially indicating an unfavourable verdict for the ruling party. Is this market nervousness a sign of future trends or a temporary blip before equities resume their upward journey?
Election season casts clouds Elections introduce uncertainty in the stock market. This time, the market’s confidence, in what seemed like an inevitable outcome, is being tested. According to initial estimates, the first four phases of the marathon seven-phase Lok Sabha elections have recorded a lower voter turn than the corresponding period in the 2019 general elections. Low voter participation is being perceived as harmful to the reelection prospects of the Narendra Modi government. The concern is that voter disengagement could potentially weaken the ruling party’s numbers, undermining policy continuity and political stability, which the market favours.
Volatility has shot up
India VIX has spiked due to election-related jitters and delay in interest rate cuts.
“The markets are currently pricing in the continuation of the government and ongoing reforms. Any deviation in these expectations results in volatility, mostly downward,” observes Deepak Jasani, Head of Retail Research, HDFC Securities.
Some analysts are expressing caution
