Mutual fund investors worry about elections?
The general election is not far away, but some investors are really concerned about it. So Many views are comings from advisers and managers with more strategy about elections.which are confusing and managers with “Now the question is What investment strategy should follow and ahead of the elections for our retail investors,
The general elections are scheduled to be held around April-May 2019 for the Lok Sabha. We looked at the BSE Sensex data for previous six months around the election times for the past five general elections held in 2014, 2009, 2004, 1999 and 1998.
Now what we found: The market moved up during three elections in 2014, 2009 and 1998. In fact, in 2009, the market saw two upper circuits in a single day after the election results were announced. The election results in 2004 and 1999 pulled the stock markets down. The benchmark index fell by 11 percent on the day election results were declared in 2004.
Irrespective of whether there was an upward or downward trend, the Sensex chart remained highly volatile during the election time.
No wonder, mutual fund managers and advisers ask investors to not alter their investment strategies ahead of the elections. “General elections are supposed to happen every five years. And, since 1980, in the last 34 years till 2014, we have seen all kinds of governments, including mixed governments and an absolute majority government. Average GDP growth stood at around 6.2 percent over the last 34 years. And, if we keep that expectation in mind, elections do not matter much.If our country grows at
around 6 percent every year, which government is ruling, does not matter much.
Most mutual fund advisers and financial planners point out that the country has gone through all kinds of disturbances, including
unexpected election results, depreciating rupee, trade wars, crude prices going up and so on. They say elections might act as a temporary dampener or boost sentiments in the short term, but in the long term, investors need not worry.
“Long-term investors need not worry or change their strategy due to the general elections in 2019. Investors must follow a disciplined approach and stick to their asset allocation. But due to high volatility, this is not the right time to invest a lump sum.
Maalde, a certified financial planner.
“If an investor is looking at six percent (average GDP growth over 34 years) plus four to five percent inflation, we do not see this as a difficult growth rate to achieve. Any good company can grow over the country’s GDP.