A man looks up at an electronic ticker board that indicates stock figures at the Bombay Stock Exchange (BSE) in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Small Caps Will Be Volatile Ahead Of General Election, Says Neelkanth Mishra

Investing in small-cap stocks will be more “painful” and uncertain, in the run up to general election, as they are more linked to the domestic economy, according to Neelkanth Mishra, managing director and Indian equity strategist at Credit Suisse.

While the headline indices—Nifty and Sensex—are remarkably stable, the lower 400 stocks in the BSE 500 Index will be volatile as they are more connected to what is going on domestically, Mishra told BloombergQuint. “As long as global equities remain stable, there won’t be too much pain in Nifty and Sensex. But outside of that, things could be very choppy.”

India is headed to a general election in May 2019 where the ruling Bharatiya Janata Party will face Rahul Gandhi-led Congress. While most market experts say the results will not have a long-term effect on the economy or the market, a change in leadership may lead to volatility for the first few months after election.

“Historically, Nifty and Sensex have not been hit by election outcomes, but you can’t say the same for small-cap names,” Mishra said.

Also read: Is Another Bout Of Volatility Brewing For Debt Funds?