Lok Sabha Elections 2024 trading strategy: What should your portfolio look like?

With the Lok Sabha Elections 2024 results approaching, the anticipation in the air is palpable, not just among politicians and pundits, but also among retail investors. As the fate of the largest democracy is to be revealed, the Indian stock market braces itself for potential volatility.

In the run-up to the election results, the benchmark indices, including the Nifty50 and Sensex, have witnessed a decline of 1.5-2 percent over the past five sessions but rose a bit in today's deals. Adding to the unease, the Volatility Index (VIX) has surged to around 24, significantly higher than the levels observed in April.

Read here: Elections 2024: Defence, power, industrials among sectoral picks ahead of result

Experts foresee the possibility of further volatility around the election results and even afterward. To navigate this uncertainty, diversifying portfolios and increasing exposure to quality stocks and sectors like infra, real estate and manufacturing are suggested strategies to cushion against market swings. Moreover, amidst heightened volatility post election, focusing on value investments and adopting a long-term perspective becomes imperative for investors.

The market sentiment seems to be factoring in approximately 330 seats for the ruling party. Any deviation from this expectation could trigger market corrections or rallies, depending on the outcome. As investors brace for the election outcome, the mantra remains to tread cautiously and stay prepared for potential market fluctuations in the days ahead.

Read here: Lok Sabha Elections: 4 investment strategies to follow ahead of election results

As the dust settles post Lok Sabha Elections 2024, investors are keenly eyeing opportunities in the market. Here's what some investment experts have to say about crafting an investment portfolio in the current scenario:

Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS

Our Nifty target for December 2024 is 25,000. We do not consider short-term events because they are influenced by numerous technical factors and can exhibit random behavior.

Quality stocks are available at reasonable prices now. We also believe that consumer stocks could do much better post election as they have underperformed in the last year and are now available at reasonable valuations. Thus, quality consumer companies could be good contra bets at this juncture.

Read here: Market may go down 15-20% if BJP secures less than 250 seats, says Ruchir Sharma

Diwakar Rana, Senior Research Analyst at Prudent Equity

The markets are in a euphoric state, and following the election, they might stay that way for a while. Therefore, it is advisable to be nimble and selective, also it will be wise to concentrate on businesses that exhibit consistently strong earnings growth and are available at reasonable valuations.

Everyone has begun to buy into the new era and new theme. Traditional valuation norms have been abandoned, and new procedures are being used to support the current pricing. While buying into a new theme can be fun, more insight and conviction is derived from looking at the companies from a bottom-up perspective. Amid the volatility and overvaluation, the investor should hunt for the company-specific growth triggers and look for growth at a reasonable price.

Read here: Lok Sabha elections 2024 trading strategy: Poll-driven equity weakness buying opportunity, says UBS

We have a strong positive outlook on real estate, banking, infrastructure, and housing financing. In our opinion, India's growth trajectory has just begun and there is still a long way to go. All of these industries will yield strong performance in years to come. In the upcoming years, infrastructure companies can have revenue growth of 15% to 20%, and some are even anticipated to see growth of above 30%.

The banking and housing finance industries are the backbone of the expanding economy and are positively correlated with the GDP of the nation; in other words, as the nation grows, so too will the banking industry. In the upcoming years, these companies can increase their loan books by more than 20%. The real estate sector is one of the sectors that is booming due to the increase in income, increased number of households, and urban migration. Many markets like NCR and MMR have seen a huge surge in demand for luxury projects.

Read here: General Elections 2024: How different poll outcome scenarios may impact equity, forex and bond markets

Viraj Gandhi, CEO, Samco Mutual Fund

The current government's emphasis on manufacturing and self-reliance is likely to drive the sector in the coming months. Companies with significant export exposure should be considered. Additionally, investments in infrastructure and emerging technologies like waste and water management, EV, hydro, and solar align with the government's focus on boosting India's GDP, offering potential investment opportunities.

Consider avoiding sectors like IT and financial services for now. IT faces pressure due to tightening US yields and slow order implementation, while financial services are under scrutiny by regulators for curtailing unsecured lending.

Read here: Foreign investors may no longer be overweight on Indian equities: Chris Wood

In conclusion, while the post-election market may present opportunities, investors are urged to exercise diligence and prudence in crafting their investment strategies.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.