Who benefits from less voting? Market experts need not read much into voter turnout.

Ronit Kawale
Ronit Kawale - Senior Editor
7 Min Read

Author – Swapan DasguptaThe extent to which political developments influence the behavior of financial markets is a subject of enduring interest. A growing group of technical analysts track market fluctuations during months and weeks of political activity, using what is called a volatility index (VIX). In May 2014, when general election results were being discussed, India's VIX was in the mid-30s. In the final round of the 2019 general elections, it dropped one place to the low 30s. We know that the 2014 and 2019 elections did not have an exciting ending.

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Election results of 2014 and 2019

In 2014, Indian voters gave a clear majority to a single party for the first time in 25 years, in addition to mixed coalition governments. Then the same pattern was repeated in 2019 also. Yet, those with a good memory will tell you that even at that time there were many reports suggesting that the BJP had an edge in some parts of Uttar Pradesh. How Muslim solidarity was working against Narendra Modi in other states. Media reports during both elections stated that there was no wave, with equations centered on caste and local governance overriding national issues.

Why the uncertainty in the market this time?

India VIX has been at a relatively low level in this election. Last week its highest level was 21.1. However, this was due to continued selling by some foreign funds and jitters among some domestic fund managers over possible political uncertainty or weak government formation. Surprisingly, some speculative markets have also seen signs of future political uncertainty. CPM leader Sitaram Yechury's assessment that the BJP-led alliance will remain below 272, while the India Bloc's figure will reach 300, does not seem credible at all. Not because the total number of leftists is barely touching double figures.

Investors fear 2004-like results!

At present, these claims have definitely given an additional boost to the actions of Modi's opponents. At least those people who are linking low voting to this. The move certainly prompted the media to ask Amit Shah if there was a Plan B. This is because investors fear another outcome of 2004 – when Atal Bihari Vajpayee unexpectedly lost. There was a similar decline in the market at that time too, so the concerns are understandable. The political fog prevailing in Mumbai has also created a stir in the market. The constantly changing alliances and unfamiliar election symbols in Maharashtra have blurred this perspective. With this the forecast has become dangerous.

Discussion on results like 1984 also

There is similar uncertainty over whether Janata Dal (United)'s performance in Bihar will be strengthened by its joining hands with BJP. It is always dangerous to expect a popular mandate in a country as vast and diverse as India. The optimism of the BJP and its allies is centered on the belief that the Lok Sabha election has turned into a presidential election, with only one candidate on the ballot. In 2014, Modi was projected as a great hope. In 2019 he emerged as a strong, outspoken national leader. Modi has been given cult status in 2024. This was done with the rationale that a very significant section would come forward to vote. Their intentions will be to go beyond the traditional pattern and vote in favor of Modi. If this is the new reality, then the results of 2024 will be broadly similar to the one-sided results of the 1984 elections after the assassination of Indira Gandhi.

These issues will dominate the fight for 2024

The logic of the 2024 decision will certainly make sense in retrospect. However, experience (and archival evidence) shows that the intensity of most election waves has been beyond the media's understanding. This includes the historic elections of 1977, 1984 and 2014. It appears that media assessments are improperly localized and err on the side of caution. Two additional factors should be considered in the current election. First, there is strong evidence that votes are swinging in the same direction from Udhampur in the North to Kanyakumari in South India. The intensity of this tilt may vary across regions, states and constituencies, but there is no mistake about the direction. The only time before this was 1984, when there were positive changes across India except Andhra Pradesh, which reversed the trend and gave the Congress 414 parliamentary seats.

PM Modi gave the slogan of 'crossing 400'

I don't know whether Modi had the experience of 1984 in mind when he gave the slogan of 'crossing 400' or not. But, it can be said with certainty that the intensity of political competition is the lowest it has been in recent times. In most elections, the biggest division and sociological dissection on the basis of caste, community and religion is seen in 80 seats of Uttar Pradesh. It would not be wrong to say that in this election the intensity of political competition in India's largest state is limited to 10 to 12 seats. Rest of the results already seem decided.

Is the opposition losing its grip in the Hindi belt?

This does not mean that the opposition has no importance in India. There is tough competition in Tamil Nadu, Kerala, Karnataka, Telangana, Odisha, West Bengal, Bihar, Maharashtra and probably Punjab, Haryana too. However, the opposition seems to be losing its grip in the Hindi belt. On paper, Congress has fielded around 300 candidates, but it is seriously fighting on around 150 seats. Signs are pointing towards how India will vote in 2024. However, on the contrary, there are also unpredictability and distortions in human nature.

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