The Lok Sabha election results are almost out. What kind of reaction has the stock market given? Everyone has seen that. The stock market closed down 6.6 percent. It has become clear that the stock market only likes a stable government. The stock market’s reaction on June 4 is just a preview.
The report by US brokerage firm UBS clearly says that whether the NDA or someone else comes to power, Narendra Modi becomes Prime Minister or anyone else. Investors may be disappointed. The UBS proposes three scenarios in its report. In these three circumstances, the market situation will not be the same as that seen in the last 10 years. Let’s try to understand how the stock market reaction can look like based on the three UBS scenarios.
‘Khichdi’ government under the leadership of Narendra Modi
What UBS has said in its first scenario is quite interesting. If Narendra Modi becomes Prime Minister in a pure NDA government, then the government will not be as strong as it has been seen in the last 10 years. In such a situation, instability can be observed in the stock market. Because the stock market likes a stable government. If we talk about the last 10 years, Sensex has given a return of 217 per cent to investors till June 3, 2024. While during Narendra Modi’s first term, Sensex had given a return of 61 per cent. While in the second round a performance of 97 percent was obtained. Now, when Narendra Modi leads the ‘Khichdi’ government for the next five years, will the stock market see the same boom? This is a difficult question in itself.
If NDA government is formed without Modi
USB has also created another situation. What if an NDA government is formed without the face of Narendra Modi? Yes, this can also be possible. The NDA members can also present a new face. How will the stock market react to such a situation? This is also a great question in itself. If experts are to be believed, even in such circumstances a decline in the stock market can be observed. There is a reason for that too. Stock market sentiment may be disturbed after seeing the new face. Even if the new prime minister does not change old policies, it may be difficult to understand and apply them smoothly. Secondly, will stock market investors like the face of the new prime minister? This will also be a great question. In such a situation, it can be considered certain that investors will have guaranteed losses.
Can allies change sides?
The UBS report also raises a third situation. That is, the main allies of the BJP can change sides and join another alliance. It is possible that the second alliance will also form a government with their support. In such a situation, the stock market may react more. The reason for this is that the government of a different party or coalition will change old policies and launch new policies. Whose effect can be clearly seen in the stock market.
It is very difficult to estimate how appropriate these policies are in the medium or long term. So the stock market may panic. According to experts, the stock market is advancing thanks to the strong government policy that has been applied for a long time. Every time the government changes or the old government weakens, a sense of instability arises at the political level. Whose negative impact is seen in the stock market.
The evil of the stock market
The stock market suffered a big drop amid the June 4 election results. The main index of the Bombay Stock Exchange, Sensex, closed at 72,079.05 points with a fall of 5.74 per cent or 4,389.73 points. While during the session the Sensex also fell by 8.88 percent, that is, 6,234.35 points. On the other hand, the main index of the National Stock Exchange Nifty closed at 21,884.50 points with a fall of 5.93 percent, that is, 1,379.40 points. During the trading session, Nifty recorded a decline of 8.52 percent i.e. 1,982.45 points. Due to this fall in the stock market, stock market investors have suffered a loss of Rs 30.41 lakh crore.
