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Even with 2019 General Elections, Indian Stock Markets Will Continue to Do Well

Ours is a nation that loves election season. Political parties flinging accusations back and forth; TV channels running agenda-driven, controversy-filled news pieces; and WhatsApp fights with friends and relatives about which leader can truly run the country well – what’s not to love!?

Although the activities mentioned here are pretty harmless to you as a person, there are other attributes of election season that in fact may cause you a lot of harm – financially speaking. We are speaking, of course, about rumours that begin going around that the elected government is going to change and investors are going to withdraw their money from the stock market. People who believe in and start doing such things are the ones who start withdrawing money in the first place and cause a dip in the markets!

However, historically, we have seen a number of times that this dip (or upsurge) is only temporary and the markets always bounce back stronger than ever. The reason for this is very simple – political changes matter very little to the performance of the stock market. The most elections can do are cause a sentimental flutter in the market, which results in a temporary high or low that invariably corrects itself in a few months’ time. So, instead of withdrawing your equity investments and losing out on months of compounding benefits, the OneInsure Research Desk recommends you to stay invested. Simply ignore the storm of rumours and theories that are bound to be kicked up as the General Election results day comes close. 

So, what decides stock market performance? The following are the macro-economic factors that do, and you will note how India is doing well on almost all metrics related to these parameters.

GDP Growth

Gross Domestic Product (GDP) growth is the measure of the economic growth of a country and is driven majorly by consumption, capital investments, and technological advancement. A large young working population increases consumption. India is demographically one of the youngest countries in the world currently. The average age of an Indian is less than 30 years. This demographic benefit is expected to continue for the next 15 years. A young population works and contributes to the nation’s growth.

Inflation under Control

Low inflation rates increase the purchasing power of the people. Reduced interest rates encourage capital investments and economic activity in the country. The low inflation reduces the cost of production for industries. The low cost of production, in turn, increases consumption and economic activity in the country.

Favourable Fiscal Policy

Fiscal policy is the yearly Budget of government revenue collection and expenditure. The fiscal policy influences the economic activity in the country. Government revenue generation is from tax collection, operations of PSUs, or divestment of PSUs. The government spends revenue on human and infrastructure development in the country, that is, health, infrastructure, and education.

Trade Surplus/Deficit

The difference between export and import is termed as trade surplus or trade deficit. Currently, India has a comfortable position on forex reserves and the government’s focus on manufacturing in India is helping us move towards trade surplus.

Moral of the Story – The Future Is Strong, Stay Invested

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