Indian stock market seems set to put up a far muted show on the results day of the 2019 Lok Sabha elections compared to the previous elections. The market opened to the news that the ruling NDA is set to assume charge at the Centre with a far higher majority than expected. This resulted in the Sensex opening at 39,110. By 10.35 am, the benchmark had inched past the historic 40,000 mark to hit a high of 40,124.96 by 10.45.

But it has been downhill ride since then and the close is likely to be far more subdued than this victory warrants. The reasons behind the stock market’s muted performance are not hard to find. One, the ra-ra rally after the exit poll results, with the Sensex gaining 1422 points on Monday had resulted in stock prices already pricing-in all the positives that can possibly emanate from this victory.

Two, Asian stock markets have been sliding this morning as trade war fears have pulled the Hang Seng down 1.65 per cent and the Shanghai Composite 1.29 per cent. It is difficult for Indian stocks to buck this global selling for too long.

Finally, the valuation of Indian market is too pricey for comfort. The Nifty 50 is currently trading at 18 times its 1-year forward earnings, at considerable premium to its historic levels. Of greater worry is the fact that the market participants are factoring in a higher earnings growth for the index constituents than that warranted by recent performance.

Previous result day moves

The performance of the indices this year is different from that witnessed in the past. Lok Sabha election result is one of the most awaited events in stock markets with traders making bets based on expected outcomes and investors worrying about the fate of the companies they have invested in. The Sensex, therefore, typically goes in to an over-drive around the election results.

Take for instance the 2004 elections. The NDA, led by Atal Bihari Vajpayee, was expected to retain power and the market had priced that in to stock prices. When there was an upset defeat for the ruling coalition, the Sensex crashed 16 per cent intraday on May 17, 2004. But hope never stops floating in stock market and prices were springing higher again once the UPA came forward to lead the government, with Manmohan Singh at the helm. Sensex was back at its pre-results levels by May 16, 2004.

There was high drama around 2009 results as well with market getting ecstatic when the Congress won 206 seats in 2009 elections, enabling the UPA to form the government without the interference of the Left Parties. May 18, 2009 was a historic day for the Sensex as it hit the upper circuit twice in that session and finally ended 17 per cent higher.

The performance of the Sensex on May 16, 2014 was relatively muted with the benchmark closing flat after 6 per cent gains during the day. The thumping majority gained by the BJP that romped home with 282 seats as the saffron wave engulfed the Nation did not impress market immediately after the results. The reason was the pre-election rally that had already lifted the benchmarks over 40 per cent higher in the previous year.

Such mature show appears likely this year too.