Uttar Pradesh is the most populous state in India and its poll outcome is keenly watched to gauge the mood and voter sentiment in the country. However, despite the political significance and the high attention it draws during the day of the results, historically, there is little evidence to show that it can change the course of the markets.

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And today, given the significant turmoil in global markets, it is uncertain whether even the impact of the UP poll results had in the past will be visible this time.

Let’s take a look at how markets have behaved in the past:

VOLATILITY ON OUTCOME DAY

Poll results days usually see high volatility. On the days of 2007 and 2012 state election results, the Nifty saw intra-day move of more than 2 percent and 3 percent, respectively. In 2017, the intra-day move was smaller, but do remember that the results were declared on March 11 and the market opened after a gap of three days on March 14. So, be prepared for some big swings on the day of the poll results, i.e. March 10.

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All three election results days also saw the Nifty ending with more than 1 percent change over the previous close. Nifty lost 1.2 percent in 2007 and 1.1 percent in 2012, while it gained 1.7 percent in 2017. So, there’s a good chance it could be a day of a significant move in one direction.

But that is where the impact of poll results seems to end. It appears that there will be no clear direction change in the market that can be attributable to it in the 10 days post the results. In 2007, for instance, the market continued its slide. In 2012, the market had moved in a different direction from the results day direction and in 2017 there was little change post the outcome day.

In a nutshell, expect volatility on March 10, and perhaps a significant daily move, but don’t bet on the election outcome to chart the course of the market beyond that particular day. The street is expected to move on from thereafter.

UKRAINE WAR THE BUGBEAR

Unlike earlier state elections, what is a big difference this time is the ongoing war in Ukraine. With no let-up in Russian aggression and the wide geopolitical and economic ramifications of the event, there is a possibility of a longer disruption in the financial markets and in world trade. It will take time for the world to come to terms with the changed new reality, and this is bound to hurt some and benefit others.

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Given that the war in Ukraine will not just impact the Russian and Ukrainian economies, but large swathes of Europe, hard and soft commodities and currency markets globally, it could also upset the inflation projections and the central banks’ planned monetary policy moves.

This year more so, therefore, the impact of the states voting results on the market may be muted.

(Edited by : Bivekananda Biswas)

First Published:Mar 6, 2022 1:29 PM IST