Investing in the Stock Market: Get Your Fundamentals Cleared First

The Indian stock market experienced wild swings following the unexpected LS election results. Amid the highs & lows of the stock market, explore if now is a good time to invest. But before you decide to invest, learn the fundamentals of the stock market.

Swati Dayal
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The Indian Stock Market is swinging between highs and lows amid unexpected election results. In the past few days, the Indian stock market has experienced significant volatility due to the Lok Sabha Election 2024 Results. On Tuesday, June 4, a sharp selloff wiped out all of Monday's gains as early trends indicated a tighter race than exit polls had predicted. This unexpected development caused panic among investors, reducing their wealth by approximately Rs 26 lakh crore in intraday deals, bringing the market capitalization down to around Rs 400 lakh crore from Rs 426 lakh crore in the previous session.

Indian Stock Market: Record Rally Followed by Plunge

Just a day earlier, on Monday, the market saw its biggest single-day rally since January 2021. Investors were optimistic due to exit poll results suggesting a third consecutive win for the NDA. The Sensex surged by 2,507.47 points, or 3.39%, closing at 76,468.78, while the Nifty 50 rose by 733.20 points, or 3.25%, settling at 23,263.90.


Election-Induced Market Anxiety

Elections often generate market anxiety due to perceived policy uncertainties, significantly impacting both the market and the economy. The relationship between election results and market performance is crucial, particularly for long-term investors. Historical data shows increased market volatility preceding elections, attributed to the uncertainty surrounding future policy directions.

Despite the election-related turbulence, brokerage firms remain optimistic. Morgan Stanley's report indicates that the pace of reforms is unlikely to slow down, emphasizing that most future reforms will focus on execution rather than law changes. Citi highlights that the government has fiscal flexibility for social spending, with an additional fiscal space of 0.35% of GDP (Rs 1.2 lakh crore) available for FY25.


Influences on the Market

The market's performance is influenced by several factors. Decisive election outcomes often lead to short-term market gains due to investor preference for policy predictability. Conversely, political instability, marked by frequent government changes, can negatively impact the market. Historical patterns suggest that market volatility tends to decline after elections as the political landscape becomes clearer.

A Good Time to Invest?


Given the current scenario, some analysts believe this could be an opportune time to invest. The recent volatility may offer buying opportunities for long-term investors, especially with the anticipated stability post-election. The optimism from brokerage firms about continued economic growth and reforms adds to this positive outlook.

While the Indian stock market has seen highs and lows over the past few days due to election results, the long-term outlook remains favorable. Investors should consider the potential for future stability and growth, making this a potentially good time to invest.

Before diving into the stock market's ups and downs, it's crucial to understand the basics. 


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