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Indian equity market performance in election year - challenges and drivers
Indian equity market performance in election year - challenges and drivers
Indian equity market performance in election year - challenges and drivers
Indian equity market performance in election year - challenges and drivers
Indian equity market performance in election year - challenges and drivers
Indian equity market performance in election year - challenges and drivers
Indian equity market performance in election year - challenges and drivers
Indian equity market performance in election year - challenges and drivers
Indian equity market performance in election year - challenges and drivers
Indian equity market performance in election year - challenges and drivers
Indian equity market performance in election year - challenges and drivers
Indian equity market performance in election year - challenges and drivers
Indian equity market performance in election year - challenges and drivers
Indian equity market performance in election year - challenges and drivers
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Indian equity market performance in election year - challenges and drivers

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I did this analysis about 7 months ago on pre-election year performance of the market. The market was hovering around 18500-19000 levels that time. Many were predicting that it will go down to 12,000. …

I did this analysis about 7 months ago on pre-election year performance of the market. The market was hovering around 18500-19000 levels that time. Many were predicting that it will go down to 12,000. However, it went off exactly I talked about in my presentation. The market as of today has crossed 21,000 giving cool 12% absolute return or 20% annualized returns.

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  • 1. March 2013 Pre-election year: impact of challenges and drivers on equity market Knowledge is Power… 1
  • 2. Question?  How many of you think that this year stock market will give  negative return  positive return  will remain neutral 2
  • 3. Analysis - background  This is a special year: it is a pre-election year…  Analyzed last 6 Loksabha elections spanning over 20+ years  Size and maturity of economy changed but similar uncertainties  What are common Challenges and major drivers v/s the performance of Sensex 3
  • 4. Elections v/s challenges # Election Year 1 1991 Major Challenges in pre-election year • Deep political uncertainty and crises at center • Short-lived governments • Polarized socio environment with ‘Mandal-Mandir’ issues • India avoided Balance of Payment crises by keeping gold as security • Gulf War and boiling crude oil Remarks • One of the most challenging years: was affected by all domestic politics, worsening economy and world political crises 4
  • 5. Elections v/s challenges # Election Year 2 1996 Major Challenges in pre-election year Remarks • Backdrop of several government • Economically scandals and resignations of several this was not a cabinet members very challenging • The then PM himself faced year considering corruption charges the liberalization • Backdrop of tense communal policies environment, riots, bomb blasts • But politically it (including BSE), and demolition of has thrown Babari Masjid significant uncertainties 5
  • 6. Elections v/s challenges # Election Year 3 1998 Major Challenges in pre-election year • Deep political uncertainty and crises at center • Short-lived governments • Rising power of left parties • The biggest political party, Congress, in a complete disarray Remarks • Economy was facing challenges due to indecisiveness of the previous two governments, Deve Gowda and Gujaral • Politically it has thrown significant uncertainties 6
  • 7. Elections v/s challenges # Election Year 4 1999 Major Challenges in pre-election year • Deep political uncertainty and crises at center • Short-lived government • Rising power of left parties • The biggest political party, Congress, continues to be in disarray Remarks • Election was happening within just a year and economy was not ready to face it • Manufacturing sector was deeply underperforming and many leading companies were facing the heat of global competition 7
  • 8. Elections v/s challenges # Election Year 5 2004 Major Challenges in pre-election year Remarks • One of the best times as far as • political stability is concerned • Both the national parties were facing elections with strong pre-poll alliances • Center had a government that lasted for 5 years • However, the shadow of global crises on the back of dot com burst were just behind us 8
  • 9. Elections v/s challenges # Election Year 6 2009 Major Challenges in pre-election year Remarks • World’s biggest financial crises after • A special case of 1929 global crises • US’ financial market collapsed and deep impact on the world economy • Politically: NDA was now in a disarray and UPA has become dominant force • Several social initiatives undertaken • High inflation just started touching our lives 9
  • 10. Drivers for the market during election year Drivers • Election related spending by the political parties, candidates and election commission – unconfirmed reports take this number beyond Rs 1 lac • Spending by the government • Soaps by the government • No major politically suicidal decision taken 10
  • 11. Pre-election year performance of equity market… Year % return 1991* + 27% Year 1996 Year + 22% % return 1998 % return +4% Year Year 1999 Year 2014 ? +66% % return 2004 % return % return +86% Year % return 2009 - 28%# * Sensex performance of last 5 months before elections 11
  • 12. Year 2009 performance – some high points Drivers • This is the only pre-election year when market gave a negative return • It was on the backdrop of deep global financial crises • Sensex nosed dived from 17,000 (Apr 2008) to 9,708 (Mar 2009) • Sensex had a ‘V’ shaped recovery and within next 6 months Sensex crossed 17,000 levels again. 12
  • 13. Fundamental factors during election year PE P/BV Div Yield Avg PE Max P/BV Min P/BV Avg P/BV Max Div Yield Min Div Yield Avg Div Yield 16.8 19.5 3.3 2.6 3 1.6 1.3 1.4 28.5 15.3 19 4.1 2.8 3.4 1.5 1.0 1.3 + 4% 16.3 13 14.4 3.2 2.4 2.8 1.7 1.4 1.5 1999 + 66% 20.4 10.3 14.6 3.5 1.7 2.6 2.3 1.2 1.7 2004 + 86% 19.4 13.2 16.4 3.7 2.1 2.9 2.4 1.7 2.0 2009 -28% 20.7 11.9 15.6 5.2 2.5 3.3 1.9 1.0 1.5 2013 ? - - 17 - - 3 - - 1.56 Year Sensex Return Max PE Min PE 1991* + 27% 21.7 1996 + 22% 1998 (present) • Average of Averages of election year • PE: 16.6 • P/BV: 3 • Div Yield: 1.56 * Sensex performance of last 5 months before elections Amazing, this is where we are currently… + We have been underperforming for last 5 year now… + Great bull markets are always built on pessimism 13
  • 14. Thank you Email: niteen.dharmawat@gmail.com Mobile: 9850571857 Blog: http://dharmawat.blogspot.com/ 14

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