Should You Alter Your Investment After Elections?

The election season is often seen as an excellent opportunity for investors to maximise profits from the market. While buying during the election season is influenced by various political decisions, it is often doubtful whether one should alter their investments after the elections.

In this article, we will delve into the impact of elections on the market, how to assess your portfolio, and whether you should make alterations post-elections. 

Introduction

The 2024 general elections in India have already started to take place in various parts of the country. As the election season unfolds nationwide, the markets frequently reach all-time highs. The market has entered a state of euphoria, with expectations of political stability and growth in the coming days.

However, this rally may not be sustained for an extended period. As the nation selects its leader for the next 5-year term, multiple sectors still require attention and will directly impact the markets.

Hence, altering your investment portfolio accordingly must be your sole perspective as a wise investor.

Understanding the Impact of Elections on Markets

The general elections in India start impacting the stock market well before they occur due to political decisions, market sentiments, and investors' optimism or pessimism.

However, the stock market often rallies before the election as the ruling party seeks to maintain political stability. Thus, as the market experiences a run-up during the pre-election season, it might have a contrary experience post-elections.
What Will Help the Market Sustain the Rally?
Despite the current rally with the Sensex crossing 75,000, sustainability is uncertain. To sustain the rally, the government needs to focus on sectors like GST collection, corporate tax cuts, and interest rate reductions. Investors fuel the market rally before the elections, but the government must address issues like the private sector and employment rates for sustained growth.

Important Factors for Second Innings

As the election season ends, here are the key factors likely to guide you in modifying investment plans following elections.

● Inflation Control: As the election season ends, the government must focus on controlling inflation rates, aiming to maintain them within the range of 2-6%. 
● Expected Foreign Investments: Increased foreign direct investments (FDI) are expected post-election, contributing to significant market growth.
● Quick Reforms: political stability post-election is expected to facilitate swift reforms, enhancing government decision-making and strengthening the country's economy.

Assessing Your Portfolio
Investors should avoid extreme optimism or pessimism post-election, maintaining a vigilant approach to portfolio management. Long-term perspective and strong fundamentals should guide investment strategies, focusing on diversification and sector resilience. Mutual fund investors should refrain from hasty decisions.

Potential Investment Opportunities Post-Elections
The post-election season presents various investment opportunities, especially in sectors likely to benefit from government decisions.

Defensive stocks such as consumer products, healthcare, and utilities offer stability amid political stability expectations. Additionally, infrastructure-focused stocks like Ultratech Cement may experience growth. 

Continuous reassessment of investments post-election and a long-term vision are essential for navigating potential opportunities and minimising risk in investment portfolios.
Guidance for Investors Post-Elections
Here are some tweaking investment strategies after elections that investors must consider.

● Diversified Portfolio: A diversified portfolio reduces risk by investing in stocks from multiple sectors. 

● Long-Term Perspective: Patience is vital; investors must focus on long-term investments for better returns.

● Inflation Rate: Stay informed about fluctuating inflation rates and central bank policies affecting various sectors.

Conclusion

You can consider altering your investment post-election but maintain a diversified portfolio and stay updated on government policies and reforms to minimise risk. Avoid hasty decisions and reassess investments with a long-term perspective.