Markets to remain volatile in the near-term ahead of elections

The stock market has generally responded favorably to election results, though there is likelihood of some short-term volatility in the months preceding the election.

The stock market has generally responded favorably to election results, though there is likelihood of some short-term volatility in the months preceding the election. However, given the strong fundamentals, markets will likely continue to remain robust over the long run, a report from Value Stocks revealed.

Shailesh Saraf, smallcase manager and Founder, Value Stocks, said, “In 2023, the Indian market witnessed an exceptional year characterized by the launch and impressive performance of significant projects across various sectors. This standout period saw a surge in mid-and small-cap stocks, alongside a record-breaking number of IPOs. Notably, the Nifty 50 saw an increase of 20% in 2023.”

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As per the report, Public Sector Undertakings have performed well in recent times and PSU stocks should be kept in radar because of their increased profitability. In 2023, the Nifty PSE Index soared by 77%, surpassing the Nifty 50’s 20% return. Even in 2024, the PSE Index has given a return of 21% as against Nifty 50’s return of 3%. There is potential for further gains due to low valuations as the Nifty PSE Index is still trading at 10 PE. 

The public sector indices namely Nifty PSE, Nifty CPSE and Nifty PSU Bank has all outperformed the major Indian indices in a 1-year time frame. This shows that the country is now believing in the public sector undertakings which is adding further strength to the market.

“Investors are optimistic about the Indian government’s development efforts. Public sector companies thrived, buoyed by increased government spending in railways and defense, and the ‘Make in India’ initiative. This led to a substantial increase in market capitalization, nearing ₹20-lakh crore. Expectations of the current administration’s victory in the 2024 general elections and robust order books also contributed to the PSE stock surge, indicating strong macroeconomic fundamentals and high demand”, added Saraf.

(The views expressed above are of Value Stocks and picked from their latest report)