Post election which stocks will perform

As the 2024 Lok Sabha elections approach, there’s intense speculation about India’s political future. With the BJP aiming for a third term under PM Narendra Modi, the elections’ outcome will heavily influence the economy and financial markets. Investors are closely monitoring sectors that could benefit from a BJP victory, such as Indian Railways and defense. However, prudent research is essential to navigate the market’s volatility post-election.

1. Defence

India’s defence budget has recently increased, with the interim union budget allocating over ₹6.21 lakh crore to the Ministry of Defence (MoD), a 4.72% rise from FY 2023-24. If the BJP is re-elected, these stocks are anticipated to grow further: Mazagon Dock Shipbuilders Ltd. (Shipbuilding), Bharat Dynamics Ltd. (Aerospace & Defence), and Hindustan Aeronautics Ltd. (Aerospace & Defence).

2. The BJP government promotes domestic oil and gas production through the Hydrocarbon Exploration and Licensing Policy (HELP) and the Pradhan Mantri Urja Ganga (PMUG) project, benefiting companies like ONGC, Hindustan Oil, Deep Energy, Reliance, and Jindal Drilling. These companies are expected to increase post elections. 

3. Since the BJP took office, numerous major banks have merged unexpectedly. Over the years, the BJP government has actively reformed PSU banks through recapitalization, improved governance, and enhanced digital infrastructure. PSU stocks are expected to increase post-elections if the BJP wins.

4. Ethanol, when blended with petrol, reduces greenhouse gas emissions. To promote ethanol production, the government initiated the Ethanol Blended Petrol (EBP) Programme. This initiative enhances energy security, reduces fuel imports, saves foreign exchange, protects the environment, and supports agriculture. In 2018, the government announced the ‘National Policy on Biofuels,’ targeting 20% ethanol blending by 2030. Due to effective government actions since 2014, this target has been advanced to 2025-26.

5. Experts predict a significant rise in Indian Railways’ capital expenditures. The government is likely to modernize existing trains and introduce new ones on popular routes, with infrastructure expansion announcements expected in the Union Budget post-elections. In the last budget, the BJP demonstrated its commitment by allocating ₹2.40 lakh crore for Indian Railways, nine times more than the UPA’s 2013-14 allocation. Key stocks to watch are IRCTC, IRFC, RVNL, and IRCON, with several already reaching 52-week or all-time highs.

For any investor it is important to understand the relation between elections and stock markets. A lot of uncertainty surrounds elections, making them one of the most volatile periods for the stock market. Elections and other political events, as well as changes in policy, have a significant effect on the stock market, much like economic fluctuations do. Political stability is often associated with rising stock markets, and vice versa, if the current administration wins an election. Elections do, however, impact stock market prices for a number of additional reasons.