Political consistency and market efficiency: an event study analysis of the 2024 Indian general elections and stock market response

Purpose This study investigates the impact of the 2024 Indian General Elections on stock market performance, with a specific focus on how political consistency—the re-election of the ruling party for a third consecutive term—shapes investor reactions. The research also examines whether these market responses support the semi-strong form of the Efficient Market Hypothesis (EMH). Design/methodology/approach The analysis is conducted using the Market Model Event Study approach on the Nifty 50 index constituents. An event window of 43 trading days (21 days before and 21 days after the election) is applied, with June 4, 2024, designated as the event date. Abnormal returns (AR), average abnormal returns (AAR), and cumulative average abnormal returns (CAAR) are estimated using regression coefficients derived from 252 prior trading days. To further evaluate industry-level effects, one-way ANOVA is employed across sectors. Findings Results indicate that AARs are not statistically significant around the election, suggesting that the market had largely priced in expectations beforehand, consistent with semi-strong efficiency. However, cumulative returns reveal a mildly negative short-term market reaction. Sectoral analysis shows significant differences across industries, confirming that political events do not affect all sectors uniformly. Practical implications The findings highlight the importance of accounting for sector-specific sensitivities in investment strategies and stress the role of political stability in sustaining investor confidence in emerging markets. Originality/value Unlike prior Indian election studies that focused mainly on aggregate market responses, this study extends the literature by incorporating a sectoral perspective. It provides new insights into how political outcomes generate heterogeneous market reactions in emerging economies.