Budget, US elections – Here are 5 key factors to trigger stock market performance in next few months

The Indian equity market, a key player in the global financial landscape, experienced a significant shift in the wake of the Lok Sabha elections. Nifty and Sensex indices made substantial gains, surging over 6 per cent since the close on election results day, June 4. In 2024, Nifty saw a remarkable surge of over 6.98 percent, and Sensex witnessed an uptick of 5.84 percent, reflecting the market’s response to the election outcomes.

With the election results revealed, attention now turns to the forthcoming significant factors poised to impact the market.

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“With the general elections behind us, market participants will focus on several critical factors in the coming months. Additionally, the Union Budget will be a major event, with expectations and reactions influencing market dynamics. The Reserve Bank of India’s (RBI) stance on interest rates will also be pivotal,” said Ajit Mishra – SVP, Research, Religare Broking Ltd.

As we look ahead to the next few months, there are several triggers that market participants will be eagerly monitoring. These events, each with the potential to significantly impact the market.

Monsoon season

The market is closely monitoring the progress of the monsoon season due to its substantial influence on the agricultural sector and the broader economic well-being.

“Domestically, the progress of the monsoon season will be closely monitored, as it significantly impacts the agricultural sector and overall economic health,” Mishra said.

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RBI policies

The Reserve Bank of India typically syncs its monetary policies with global central banks’ ones. Whether it will wait for the US Fed to make the first move on interest rate cuts or act preemptively is a matter of anticipation. A rate cut is favourable for the market and is anticipated to stimulate economic expansion. The ongoing meeting of the RBI’s monetary policy committee, the first since the election, is in progress and will conclude on June 7, 2024.

Upcoming budget for 2024-25

With the Lok Sabha elections set for April-May 2024, India saw a vote on account in February, while the primary budget is slated for presentation in July 2024. Budgets have traditionally served as significant market catalysts, with participants closely monitoring fiscal figures, tax regulations, reforms, and more. The forthcoming budget is poised to be pivotal, particularly given the BJP’s inability to secure a clear majority.

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US elections

Another major driving factor to drive the performance of stock market is upcoming elections in the USA. The US elections, in particular, will be pivotal in shaping anticipated policies in the world’s largest economy. These key policy determinations will ultimately influence fund movements and the decisions of foreign investors regarding emerging markets.

US Fed rate

The Federal Reserve’s stance on inflation has been marked by significant skepticism, particularly as price increases since January have failed to warrant near-term rate cuts. The trajectory of economic data in the coming months will be pivotal in determining whether the Federal Reserve maintains its stance of higher-for-longer interest rates or opts for a rate cut in 2024.

“On the global stage, the interest rate environment in the United States will be a key area of attention. The US Federal Reserve’s decisions on interest rates can have widespread implications for global liquidity and investment trends. Moreover, the upcoming general election in the US will add another layer of uncertainty and potential volatility to global markets,” Mishra added.