The future of the stock exchange related to the new government policy, expert analysis

According to experts speaking on Tuesday, the future of the stock market is closely linked to the economic policy of the new government. Key elements such as GDP growth, inflation and global conditions will be crucial in determining the direction of the market.

As the BJP-led NDA continues its efforts to form a government – with significant support from coalition partners – markets remain volatile. Experts are warning investors to prepare for volatility due to currently high valuations, advocating for a diversified approach.

On Tuesday, benchmark equity indices Sensex and Nifty fell over 8 per cent in intra-day trading, ending almost 6 per cent lower. This marked their worst decline in four years, triggered by an emerging trend that the BJP may not get a clear majority in the Lok Sabha elections. Sensex crossed 4,389.73 points to settle at 72,079.05 and Nifty lost 1,379.40 points to 21,884.50. However, markets rallied on Monday after exit polls predicted a landslide victory for the BJP-led NDA.

The distinctive reformist approach seen in the NDA’s previous two terms may be pushed aside in this uncertain political climate, said Manish Chaudhary, research director at StoxBox. With the BJP likely to secure around 240 seats in the 543-member Lok Sabha, a potential coalition government will require alliances with parties like TDP and JDU.

Yashovardhan Khemka, senior manager of research and analysis at Abans Holdings, emphasized that relying on coalition partners to make key policy decisions and government positions can lead to policy paralysis and government uncertainty.

Suman Bannerjee, CIO at Hedonova, echoed these sentiments, emphasizing that the future of the market will largely depend on the economic strategies of the new government and factors such as GDP growth, inflation and global conditions.

Political stability since May 2014, coupled with reforms and favorable global economic factors, has led to a strong rally in the Indian stock market. There has been a remarkable increase in investor wealth of over Rs 300 lakh crore during this period, demonstrating strong trust and commitment.

Experts noted that investors favor policy continuity and India’s long-term structural development remains intact. “Many pieces are in place. Economics should prevail above all else. We are already leading in terms of factors such as GDP, market capitalization and demographic dividend,” commented Manish Jain, Head of Institutional Business at Mirae Asset Capital Markets.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndication feed.)