Not just the general elections in 2019, but the upcoming state elections in Rajasthan, Madhya Pradesh and Chhattisgarh are going to play an important role in determining the stock market’s trajectory this year, said experts at the eighth edition of The Finapolis Knowledge Series held in Hyderabad on July 27.
The Finapolis Knowledge Series is an endeavour by the Karvy group to spread awareness on a variety of topics of interest to businesses, investors and individuals.
In the eighth edition, four panellists deliberated on the topic “Bulls, Bears and Politics: The Impact of Politics on Stock Markets”. The panel featured Manish Gunwani, chief investment officer of Reliance Mutual Fund, Rajat Jain, chief investment officer at Principal Mutual Fund India, R Srinivasan, editor of The Hindu Business Line, and Nadendla Manohar, former speaker of the Andhra Pradesh Legislative Assembly.
In the keynote address, V Ganesh, CEO of Karvy Computershare, said the government is likely to boost expenditure in infrastructure before the elections, which will impact the markets.
“The market will be looking at two factors in the run-up to the elections — how the political alliances evolve and the three state elections of Rajasthan, Madhya Pradesh and Chhattisgarh in November and December. The existing government has a lot of seats in this belt. Even the vote swings will be analysed threadbare to get a sense of how things are moving. Any news of alliance in the states will have a certain impact on the markets,” said Manish Gunwani.
“Markets would like predictability and certainty,” said Rajat Jain.
“Domestic investors do not like to be a part of uncertainty and hence, they only participate after the elections,” said R Srinivasan.
Agreeing with other panellists that the markets look for stability in governance, Nadendla Manohar said, “The markets doing well is a reflection of the economy. However, there are several other issues other than political ones at play in the markets. The agrarian sector is badly hit and the farmers believe that the government has not done enough. Whatever they have done in the form of the recent minimum support price programme has come too late. These factors will play an important role in the markets and in politics this year,” he said.
All panellists agreed that in the election year markets do well and eventually what happens depends on the budget.
“There a lot of participation of retail investors who comprise more than half of mutual fund assets, at present. A good chunk of this is also on equity. These make the political parties more accountable,” Rajat Jain said.
The evening ended with the audience seeking answers from the panellists on the impact of geo-political tensions on the Indian equity markets and the overall political scenario.