Impact of 2012 Assembly Election On Stock Markets

Indian Stock Market witnessed volatile movements in the morning until the clear consensus emerged during noon that SP is going to come in UP with full majority. 

Initially when the markets opened at 9:15 A.M it went up based on a hope that Samajwadi Party might not get full majority and could pull in Congress to form the government in UP. But as the day progressed it became clear that SP would get full majority and won't require congress support. That made the Indian stock Markets very nervous and SENSEX fell more than 550 points from the highs of the day.

So what were the reasons for nervousness and what's the future?

1. With this defeat in UP and Punjab, UPA has become vulnerable to split where TMC and DMK are the major threats which could imbalance the government in centre and, who know, create a situation of mid term polls

2. The budget 2102 is now expected to be more of populist rather than economic. Consensus would suggest the Congress will get more cautious; i.e. effectively hand out more sops resulting in further fiscal slippages and move further away from reform – a mix that will be negative for the Macro.

Sensex, Nifty gained for seventh straight week

Key benchmark indices gained for the seventh straight week to scale highest closing level in 28 weeks as latest government data showed that inflation in January eased to a 26-month low. Nifty continues to form higher highs throughout the week and finally closed above 5550 levels. 

Foreign institutional investors (FIIs) pumped in another 3500 crores during last week taking total for 2012 to 24,100 crores (till February), as per provisional data from the stock exchanges. The BSE benchmark Sensex was up by 540.70 points or 3.05% for the week to settle at 18289.35 levels. The NSE flagship Nifty ended at 5564.30 levels, up by 182.70 points or 3.40%. 

In February 2012 (till February 16), FIIs were net buyers to the tune of 11553 crore, while MFs were net sellers to the tune of 5860 crore.

Indian Stock Market Performance: 10 Years History

SENSEX and NIFTY, the benchmark indices of Indian stock market, has performed very well in last decade in spite of it's under performance in last 2 - 3 years. In 1998 the NIFTY index was at 884 which went to as high as 6138 in 2007 and then fell to 4624 level in 2011.

Just to summarize the absolute returns generated by the NIFTY index over the last decade, following is the year wise Index closing levels and return generated since 2001.

Year	NIFTY Closing	Return (%)
2001	1020	-15.8
2002	1094	7.3
2003	1880	71.8
2004	2071	10.2
2005	2805	35.4
2006	3970	41.5
2007	6138	54.6
2008	2857	-53.5
2009	5188	81.6
2010	5998	15.6
2011	4624	-22.9