Madhya Pradesh, Chhattisgarh Assembly Elections 2023: How Elections Impact Stock Market?

Assembly elections are in full-swing with a fresh round of voting in states like Madhya Pradesh and Chhattisgarh having commenced. Counting of votes in these two states will be held on December 3rd, along with other states like Telangana, Rajasthan and Mizoram. Assembly election is important and definitely has a huge impact not just state-wise but also on the country's economy. Even stock markets are affected by which party will rule respective states as the reigning regime brings in key developments and changes for not just citizens but also business activities.

A brief about the latest assembly elections: The latest voting is ongoing in Madhya Pradesh, and Chhattisgarh which are situated in the heart of India. The main electoral battle is between the current ruling government Bharatiya Janata Party (BJP) and its rival the Congress Party which has in recent times revamped its tactics and even its brand name. Elections have started for all 230 assembly seats in MP and 70 seats in Chhattisgarh.

While in Madhya Pradesh, the current party in power is BJP, in Chhattisgarh, Congress is the incumbent. Both are fighting to continue their power in their respective states. Apart from this, voting have already taken place in states like Telangana, Rajasthan and Mizoram.

Votings in these states will be counted on December 3, followed by an outcome.

In general terms, assembly elections involve voting from every citizen of India in only their constituency. Candidates who win the State Legislative Assemblies elections become the 'Member of Legislative Assembly (MLA) who then hold their respective positions for a tenure of 5 years or until their ruling party is dissolved.

Wins in assembly elections play a crucial role in the main general elections which will be scheduled in early 2024s. And that will have a huge influence on the stock market.

According to Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, during the last five General elections, the markets had rallied in the run-up to the elections with returns ranging from 3.1% to 30.4% in the six months to the elections. Sharp movements after the elections happen only when the election results are totally unexpected.

He said this happened after the 2009 elections when the UPA govt got a thumping victory and the market set a record, hitting the upper circuit twice.

Furthermore, Vijayakumar said, "Markets like stability and, therefore, the market's preference would be the continuation of the BJP regime. But if the I.N.D.I.A alliance succeeds in toppling the NDA, there will be a sharp correction in the market. But the probability of such an outcome is very low now."

On Friday, Sensex and Nifty 50 ended in red. The 30-scrip benchmark stood at 65,934.53 lower by 47.95 points or 0.07%, while the 50-scrip index ended at 19,731.80, down by 33.40 points or 0.17%.

In a span of five years to date, Sensex has skyrocketed by a massive 29,600.43 points or 81.78%. Nifty 50 was not far away, it rallied by a huge 8,855.05 points or 81.41%.