The 2024 lok Sabha elections have caused significant nervousness in the stock markets. By last weekend, the Sensex and Nifty had only risen 2.4% and 3.5%, respectively—their worst performance since 2004, according to a Financial Express report.
This modest gain came after a recent market mood improvement. The India VIX, indicating expected volatility over the next 30 days, has surged 40% to 20.5.
Several factors contribute to market anxiety. Initially, bulls expected a strong mandate for the incumbent government in the Lok Sabha elections and anticipated rate cuts from the US Federal Reserve.
However, uncertainty surrounds the incumbent government's potential seat count, and the Federal Reserve has postponed rate cuts. Additional concerns include the geopolitical crisis in the Middle East and China's resurgence as an investment destination.
FIIs have net sold shares worth around Rs 28,500 crore so far in May, making it one of the worst months in recent years from a foreign fund flows perspective.