Why Bernstein doesn't think that "low voter turnout" should cause investors to fear just yet

Bernstein does not believe that the outcome of the election will be significantly affected unless there is a sharp drop in voter participation and a notable anti-incumbency movement.

Bernstein says that the elections become a market-defining event only in the event of a major vote share loss (above 5 percent) and considerable anti-incumbency.

When Phase 4 of the Lok Sabha election came to an end, the markets were erratic. The 67.3 percent voter participation in Phase 4 was less than the 69.6 percent in the 2019 general elections, continuing the pattern of declining voter turnout seen in the previous three stages.

Stock investors were alarmed by the decline since the market was pricing in a bigger mandate for the BJP-led NDA this time around. Bernstein, however, noted that there isn't a direct link between voter participation and election results in the past.

According to the international brokerage, one shouldn't read too much into the turnout figures—at least not just yet. It would take much more than a mere decline in the percentage of votes cast for the BJP-led NDA to make a meaningful dent in the total. Only then could India Inc. begin to consider a case of non-continuity.

"A 2-3 per cent decline in voters along with anti-incumbency could possibly lead to figures slightly lower than the 2014 tally," Bernstein said.

They should replicate the 2019 numbers with a little uptick or downtick, the research said, if there is a significant drop of more than 5% without strong opposition to the incumbent. "Only the case of a large vote share decline (over 5 per cent) as well as significant anti-incumbency is where the elections constitute a market-defining event," it said.

The opposition's greater national unity, according to Bernstein analysts, should only begin to have significant effects at this point (post-Phase 4 voting).

Bernstein further emphasized that ballot voting is not included in the figures on voter turnout that was made public that same day. As a consequence, it's like comparing apples to oranges with 2019.

"Once ECI released the final data for the first 2 phases, covering the ballot votes, the voting percentage increased 5.5 percent, mending quite a lot of gap." It said that "so the impact is likely to be less than anything an immediate comparison may show" since the influence of the ballot papers this time is apparently higher than it was in previous years.

The foreign brokerage stressed that there won't be much of an impact on the election's overall outcome unless there is a sharp decline in voter turnout and a noticeable anti-incumbency movement. The incumbent party is predicted to win, maybe even surpassing the results of 2019.

The seven-phase Lok Sabha election is scheduled to end on June 1 after starting on April 19. The results of the election are expected on June 4.

So far this month, Nifty 50 has corrected almost 2 percent. As the index gets closer to the 22,300 mark, there may be a stop or a restart of the corrective phase, according to Religare Broking Ltd. SVP of Research Ajit Mishra.

A reduction in volatility, however, may stop the drop. "The mixed sectoral trend presents opportunities for traders on both viewpoints of the market, so it's important for them to plan their trading strategies accordingly," he said.