Indian equity benchmark index, S&P BSE Sensex, began its pre-election rally in March 2019 in expectation of Narendra Modi-led National Democratic Alliance government's victory in the 17th Lok Sabha elections. In that euphoria, both Sensex and Nifty50 touched their record high levels this year. However, going back to the past two government terms, Sensex had witnessed receding returns along with low equity inflow from foreign institutional investors (FIIs).

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In May 2004-2009, Sensex rose about 207 percent with a five-year compounded annual growth rate (CAGR) of 25.2 percent. During 2004 general elections, Indian National Congress won with a comfortable majority, and the Indian markets witnessed one of the finest comebacks in its history. The growth witnessed during those five years was the most escalating one as compared to other post-election terms.

The growth trend of Sensex, however, started to fall after 2009 elections. During May 2009-2014, Sensex surged only 66 percent with a five-year CAGR of 10.6 percent. Now, this was also an impact of the US stock market, which crashed during that time. The Dow Jones Industrial Average of the US dropped more than 50 percent in 2009. However, one positive about that term was the high level of FII equity inflow. During that period, FIIs had pumped in Rs 4.55 lakh crore.

Moving on, Sensex and FII inflows started to decrease post 2014 Lok Sabha elections. Sensex climbed only 60 percent with a 5-year CAGR of 9.8 percent. During 2014-2018, FIIs invested low capital in Indian markets, only about Rs 2.36 lakh crore.

Also, read General Elections 2019: How Sensex performed during previous poll quarters

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