The stock market showed signs of stability in anticipation of the exit poll forecasts from the recent general elections. An analysis of share price movements following previous election exit polls indicates investors have generally remained hopeful, banking on continuity in governance.
During the 2019 polls, both benchmark indices rose over 3% a day after exit poll predictions, reflecting confidence the existing administration would be reelected. Similarly in 2014, both indexes climbed around 1.35% as exit polls estimated another term for the ruling coalition.
However, the reaction was mixed in prior years. In 2009 shares dipped approximately 1-1.2% despite forecasts of a hung parliament. Four years earlier exit polls projected a hung house but markets slumped 4-3.93%, possibly due to instability concerns.
This cycle, over a dozen exit surveys jointly gave the incumbent alliance around 306 predicted seats on average. Should actual results uphold continuity as predicted, market gains may follow as was seen in the recent past. But a significantly different outcome could inject uncertainty into a situation where stability is being banked on.
Overall it seems stability and predictability in the political landscape tend to be favored on Dalal Street. Investors will be closely watching the declaration of actual results for confirmation of exit poll projections and direction. As with previous cycles, stability is likely to see the market consolidate further.
