Investment strategy ahead of Lok Sabha Poll 2024 results

Five phases of the Lok Sabha elections have ended and two more are ahead. The survey results will be known in less than two weeks. The overall market has been highly volatile since the polls began and is expected to remain stable until the results are announced. The question is: How should investors ride this wave? In this article, we look at various investment strategies that investors can adopt ahead of the Lok Sabha results.

Current scenario of market indices

If you look at the market over the last few weeks, you can see that it has been volatile. However, on Thursday (May 23), the stock market ended the day with gains of over 1.5%, setting record highs. Nifty has been trading in positive territory over the last one month, although it has seen many ups and downs. Some sectors led the market growth, while others struggled. In the next two sections, we will look at the sectors that are driving the market up and those that are dragging it down.

Sectors that recorded growth

Sectors that have seen growth in the recent past are due to expectations that companies in these sectors will perform better once the new government comes in. The market expects a stable government, which has largely led to growth in some sectors. Here are some of the sectors that have seen the highest growth over the past month.

• Metals and Mining – 20.02%
• Transport – 15.22%
• Consumer durables – 13.04%
• Healthcare – 10.21%
• Real estate – 9.66%

Sectors that saw a decline

Despite Nifty50 rising 2.52% in the last month, some sectors have underperformed. However, none of the sectors declined significantly. To give you a better picture of the underperforming sectors, we consider a 3-month period. Here are some of the sectors that have underperformed or delivered negative results over the past three months.

• Media – (6.59)%
• Software and services – (5.75)%
• Forest materials – (5.46)%
• Telecommunications – (4.44)%
• Fertilizers – (2.93)%

Different investment strategies in uncertain times

Uncertain times, such as those leading up to election results, can be stressful for investors. But you don’t have to worry. There are strategies that can be used to deal with this volatility. Here are some strategies anyone can use:

Take a balanced approach: Don’t panic – sell your existing investments. Stick to your long-term plan and risk tolerance. A phased approach to investment should be considered. Allocate some of your capital now and keep the rest for post-election adjustments depending on the result.

Leverage diversification: Spread your investments across different asset classes such as stocks (different categories) and bonds. It helps reduce risk because some assets may perform better than others during market fluctuations. Try exploring low-volatility sectors such as consumer staples or utilities. These sectors are usually less sensitive to election results.

Adopt systematic investment plans (SIPs): SIPs automate investing a fixed amount at regular intervals. This approach helps you average out market volatility over time, potentially buying at lower prices on dips. Continue your SIP even in uncertain times.

Be careful with high-risk investments: Uncertain times may not be the best time to make aggressive investments such as small-cap stocks. They tend to be more volatile and react strongly to news events.

Major sectors driving the Indian economy

Now if you want to bet on the ‘Indian story’, you have to bet on the sectors that have and will continue to drive the Indian economy. Here are the most popular sectors:

• Agriculture and related activities: The sector contributes approximately 18.3% to India’s Gross Value Added (GVA) and employs a significant portion of the workforce. It includes agriculture, fishing, forestry and related activities such as animal husbandry, dairying and poultry. India is a major producer of rice, wheat, cotton, sugarcane and spices.
• Textiles: India has a long history of textile production and is a major global player in cotton, synthetic fibers and clothing.
• Car: The Indian auto industry is one of the fastest growing in the world, driven by a growing middle class and increasing demand for vehicles.
• Information technology (IT): India is a global IT services and software development hub, known for its skilled workforce and competitive costs.
• Financial services: India has a well-developed banking and financial system, facilitating investment, credit and insurance services.

Before you go

As mentioned above, the market will remain volatile, but experts believe there will be no major correction in the run-up to the election results. The market has priced in the ruling party’s victory, and the mood will be influenced by the actual number of seats that the winning party will win. Investors should monitor their portfolios and avoid making high-risk bets ahead of election results.