Uncertainty over election results will keep Indian stok market volatile: Experts

The Indian equity market indices Nifty-50 Index and Sensex both experienced losses of around 3% each over the past week, while the mid-cap index saw a decline of 3.9%. The Indian market has been consistently under pressure from selling by investors, leading to volatility in the past week.

In contrast, global markets have maintained their buoyancy, with Brazil, Germany, and the US emerging as the top-performing markets. Experts attribute this disparity to the apprehension surrounding the upcoming elections, which is making investors adopt a cautious stance.

According to Ajay Bagga, Banking and Market Expert, "Given an electorate of 980mn plus, of which some 620-640mn will vote, and that more than 1bn are giving opinions every day, it is but logical that there will be a lot of uncertainty and confusion around the June 4th Election Results outcome."

Bagga further added, "India VIX which tries to signify the volatility in the Indian markets has risen more than 67% in the last 12 days on the back of this. What a level of 19 means is, that over the next one year the Nifty can be in a +/- 19% range. This is still not so high, given India VIX was at 30 plus in both the 2014 and 2019 elections. We expect India VIX to go up further going into the June 4th vote counting."

During the last week, all sectoral indices, except auto and FMCG, witnessed losses on a week-on-week basis. Sectors such as capital goods, consumer durable, oil and gas, realty, power, and Bank Nifty suffered the most, with declines ranging between 2 to 4 per cent.

Conversely, auto and FMCG sectors experienced marginal gains during the same period. Moreover, Foreign Portfolio Investors (FPIS) were net sellers, while Domestic Institutional Investors (DIIS) were net buyers.

"Major global indices, including Nifty 50, are trading around all-time highs and the shift in the interest rate scenario has led to some profit booking.