election outcomes

Fund Manager View to pay to predict election outcomes

 

Does it pay to predict election outcomes?

Rather than guessing results, investors should identify other critical factors

Elections are considered to be the mega events for stock markets. Therefore, it’s not surprising that many pundits try to predict election outcomes much in advance.

Getting it right

Arguably, with the advent of big data, social media and other advanced technology, the accuracy of the predictions should have improved . However recent examples in the US, Europe as well as India hint against that, Getting the election forecast right appears to have become more of an exception rather than the norm.

Long-term effect

Even if we assume that there are pundits out there who can and will predict the accurate election outcome, the real question is how useful is this endeavour? For that, we need to check whether what we perceive to be a good or a bad election outcome for macro and markets, turns out to be so in the next five years.

Beyond elections

The first and foremost thing is continuity of economic policies – this should be maintained and/or improved under the new government.

Elections and market returns
Lok sabha term Form of Government Coalition Sensex returns Starting PE Ratio Ending PE Ratio
1996-1998 Minority Third Front -5% 12.20 11.07
1998-1999 Minority NDA 24% 11.07 16.19
1999-2004 Majority NDA 4% 16.19 12.54
2004-2009 Minority UPA 19% 12.54 15.66
2009-2014 Majority UPA 10% 15.66 15.12
2014- Majority NDA 11% 15.12 N/A

 

 

Source- Business Line, Google.

 

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