Electoral Influence on Financial Markets: Analysing the Impact of the 2024 Indian General Elections on NIFTY Bank Constituents

Abstract

This study aims to explore the impact of the 2024 Lok Sabha elections on the share price movement with a focus on the Nifty Bank PSU and integrated an event study methodology to examine the impact of the results of the election on share price movements of 13 banks (Nifty Bank PSU). Findings suggest that the investors reacted in an adverse way as the NDA government ruling party failed to secure majority seats. Exit polls had boosted expectations of a strong NDA majority, initially lifting market mood. However, when the actual results showed the ruling alliance falling short, the market reacted negatively, especially in the days immediately following the announcement. This shift in sentiment was not only visible in price movements but also statistically significant, indicating a genuine reaction rather than market noise. This paper highlights that political developments can strongly influence sector-specific investor behaviour in the short to mid term. The current study offers valuable insights to academicians, policymakers, investors, and stakeholders. This study clearly underscores the importance of political stability and governance for the performance of public sector financial institutions.

Keywords: Lok Sabha Elections, Event Study Methodology, Average Excess Returns, Cumulative Average Excess Returns, Nifty Bank, Political Stability

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