House View: Elections, volatility, markets

The global wave of elections is riding on unpredictability. From unexpected victories to sudden calls for snap elections, it's clear that political volatility is a prominent feature of the current global landscape. In UK, the Prime Minister announced surprise elections while it wasn’t required to call for elections until Jan’25. In France, the president dissolved the parliament and called for elections within a month (Jun’24). On the flip side, voters in two developing economies, Mexico and India, surprised the world with unexpected outcomes. In Mexico, the Morena party coalition emerged victorious with a significantly larger margin than anticipated by the polls. In India, the BJP fell short of a working majority, requiring the incumbent Prime Minister Narendra Modi to negotiate with coalition partners for the first time. Additionally, the United States is also heading for national elections in Nov’24 which has implications on global dynamics.

Highlights

• Equity markets have shown a mixed trend. The US market indices have moved higher in this quarter while the European ones corrected sharply.
• In spite of expectations of bond yields going down at the back of peak rates, the long US treasury has finished flattish in this quarter. Brent crude was flattish across the quarter with a sharp correction in May amid concerns of oversupply and low demand through the rest of 2024.
• Despite foreign institutional investors (FIIs) recording net outflows of USD 0.9 billion in 1QFY25, Indian equity markets reached a new all-time high, buoyed significantly by domestic institutional investors (DIIs) injecting approximately USD 15.4 billion.
• As per World Bank, Global growth is projected to hold steady at 2.6% this year in line with 2023, despite flaring geopolitical tensions and high interest rates. India to be standing out with 7% growth expectation in FY25 (as per RBI).