It's wild, wild May for Indian stock markets during Lok Sabha elections

The popular stock market adage ‘sell in May and go away’ hasn’t really worked in the context of the Indian markets. The average return for the month of May since 2011 has been 1 per cent for both the Nifty and the Sensex, rendering the adage inconclusive. However, stock market performance in May has an altogether different meaning in years when there is a general election.

In the past four occasions since 1999, the stock market has witnessed wild swings in May when the nation has gone to the polls. In May 2014, the benchmark indices had risen 8 per cent, cheering Narendra Modi-led Bharatiya Janata Party (BJP) landslide victory.

In 2009, the markets had sky-rocketed 28 per cent after the United Progressive Alliance (UPA) emerged victorious on the back of an unexpected rise in the Congress’ seat tally. In 2004, the Sensex and the Nifty had plunged more than 16 per cent after the UPA came to power with the help of Left. 

So far this month, the market has been relatively tranquil pinning hopes that the BJP will once again come to power. However, going by historical data, it could be anything but disturbance-free by the end of the month.