General Elections 2024: Will Nifty50 extend gains for 4th straight month in May? What strategy should investors use?

“Markets have been inching gradually higher for the last five months and we feel this trend won’t reverse until the Nifty decisively breaks 21,900 levels. However, stocks, on the other hand, are seeing volatile swings, mainly in reaction to the earnings announcement. We thus recommend maintaining a stock-specific approach and preferring the sectors/themes, which are showing consistency in their trend for long trades. At the same time, we feel there is no harm in keeping a few shorts as a hedge, citing the mixed signals from the global front,” suggested Ajit Mishra – SVP, Research, Religare Broking.

Indian benchmark Nifty ended April with 1.24 percent gains after a 1.57 percent and 1.18 percent rise in March and February 2024, respectively. However, it was flat but in the red in January this year.

Read here: General Elections 2024: With polls underway, will ‘Sell in May and Go Away’ adage apply this year? Experts answer 

Constituents

While Indian markets ended April on a positive note, it is important to note that not all stocks contributed to the gains. Moreover, 28 of the 50 stocks in the Nifty50 index gave negative returns in April while the remaining 22 were in the green.

Eicher Motors was the top gainer, up 17.6 percent followed by Hindalco, Axis Bank and Divi’s Labs, rising over 10 percent each. Apart from this, Airtel, M&M, PowerGrid, SBI, ICICI Bank and NTPC advanced over 5 percent each in April.

Among losers, HCL Tech was the top and only dragger that gave double-digit negative returns in April, down 10.5 percent. Meanwhile, Kotak Mahindra Bank, Sun Pharma, HDFC Life, Apollo Hospitals, Adani Enterprises, Cipla, Adani Ports, and L&T shed over 5 percent each last month.

Read here: Nifty 50 surges 1.2% in April led by banks and auto stocks, IT sector lags

Outlook

While most experts expect the positive sentiment to continue in May with hopes of the Indian bourses hitting new highs, however, some experts also see some correction in the near term as elections are likely to bring some volatility in the markets. Experts also recommend strategies you should use this month.

Neeraj Chadawar, Head – Fundamental and Quantitative Research, Axis Securities.

Elections always bring volatility in the market. However, the returns expectations for FY25 have significantly deviated due to a runaway rally in FY24. Favourable policy continuity after the general election results is a significant positive, but the market has been factoring this since December 23, after the big-bang performance of the BJP in assembly elections across three out of four key states. In that regard, a post-election rally seems unlikely. 

Moreover, with a strong catch-up by Midcaps and Smallcaps in the last couple of months, we still believe the margin of safety in valuations for these segments at current levels has reduced compared to that available in large caps. With this in view, the broader market may see some time correction in certain pockets, and flows will likely shift to large caps. Based on this, we believe Nifty 50 could see a new high in the near term.

Read here: General Elections 2024: No major impact of polls on equity market, says FidelFolio

V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services

We are in a bull market. Nifty has tripled from the 2020 March lows. Explosive growth in the number of demat accounts from around 4 crores in March 2020 to above 15 crores now indicates the arrival of the retail investors. Indian retail investors, HNIs and DIIs are calling the shots in this bull market and FIIs are consistently losing the tug of war going on in the market. The rally is fundamentally supported by impressive GDP growth and decent corporate earnings. 

The market has already discounted the NDA/BJP in the elections. Therefore, the election outcome is unlikely to influence the market beyond a point. However, the market is likely to react to the Budget which the prime minister has already indicated will be ‘transformational’.

Akhil Jain, MD, KKJ Financial Services

Since 2000, May month has given 12 negative returns for the benchmark Nifty index. However, May has also been one of the highest returning months with a 28.07 percent increase in the year 2009. The general consensus in the markets currently is a rally until the election results and a correction post that. However, we feel markets will continue to reward companies with earnings growth and visibility. The India Vix is currently showing signs of stability, however, there could be a spike in volatility as we near the election results.

Read here: Lok Sabha Elections 2024: What should investors do amid market volatility?

The market is expected to consolidate with a positive bias, with a focus on Fed interest rate decisions, corporate earnings, monthly auto sales numbers, and manufacturing PMI data. FII activity will also be watched this week, though FII outflow has been more than compensated by consistent, robust buying by domestic institutional investors in the equity markets over the previous week as well as in the current month. Technically Nifty 50 is expected to face resistance at the 22,441 level, followed by 22,620 and 22,710 points. On the lower side, the index may take immediate support at the 22,386 level, followed by 22,330 and 22,240.

Arvinder Singh Nanda, senior vice-president of Master Capital Service

The current scenario and dynamics present challenges of a broader horizon, to mention a few, the geopolitical tensions may impact the market’s efficacy. Elections bring a sense of uncertainty to the market, thus holding the power and potential to alter market patterns and introduce new market behaviours. Therefore, investors need to stay flexible and make decisions after thorough research. The ultimate decision to stick with or stay away from this scenario of the market depends on careful and comprehensive evaluation of prevailing market dynamics and investor’s individual investment goals.

Read here: General Elections 2024: How macroeconomic factors like equities, FPIs, inflation this year compare with 2019 polls

Anil Rego, Founder and Fund Manager at Right Horizons

Structural tailwinds for the economy are driving markets at its core as policies have pivoted to strengthening infrastructure, giving precedence to domestic manufacturing and boosting consumption by focusing on reforms to improve private investments.

In the previous four general elections, the equity markets gradually factored in the anticipated election outcomes during the six months leading up to the election date. Since investors in emerging markets prefer a stable government with a robust development or reform agenda, we are constructive on the domestic macro and believe the capex-driven expansion will likely sustain the growth cycle.

Read here: General Elections 2024: An up move seems more likely than a correction ahead of polls, says Shauryam Gupta of Rupeezy

India has experienced political stability since 2014 under the majority rule of the BJP. Despite facing some political setbacks, particularly at the local level, political continuity is the anticipated outcome in the upcoming national elections. We expect the markets to do well over the long term driven by healthy earnings growth and are not concerned about short-term transitory influences.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decision. 

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Published: 01 May 2024, 10:52 AM IST