Page 57 - IMDR Journal 2025

Research Article
IMPACT OF LOK SABHA EXIT POLLS ON CAPITAL
MARKETS A DEEP TECH PERSPECTIVE

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Rohan Aggarwal ,Vishwas Murmure , Abhijeet Sonawane 1

ABSTRACT
This research examines how Indian Lok Sabha elections influence financial markets, particularly stock indices, currency
fluctuations, and investor sentiment. Findings indicate that exit polls significantly impact market movements, affecting
investor confidence and trading behavior. The study also explores how policy changes and foreign direct investment (FDI)
flows are influenced by election outcomes. This study proposes the use of Deep Tech Multi-Agent Reinforcement Learning
(MARL) to simulate and predict capital market reactions to exit polls, leveraging AI-driven trading strategies to enhance
decision-making in volatile election periods.
KEYWORDS Lok Sabha Elections, Deep Tech Multi-Agent Reinforcement Learning (MARL), Exit Polls, Financial
Markets, Stock Indices.

INTRODUCTION LITERATURE REVIEW
The Lok Sabha election is one of the most significant Amitesh Kapoor (2013) examined the effects of political
democratic exercises globally, as it determines the events on the Indian stock market and the investment
composition of the lower house of India's Parliament. The climate. His research underscores the importance of
Lok Sabha, or the "House of the People," consists of 545 political stability and the anticipated outcomes of elections
members, out of which 543 members are directly elected by in shaping investor behaviour. Kapoor findings suggest that
the people of India, and 2 are nominated by the President to political events, including exit polls, can lead to substantial
represent the Anglo-Indian community (a provision recently market fluctuations as investors react to the perceived
abolished in 2019) held every five years. Political parties likelihood of various electoral outcomes. (Kapoor, 2013)
field candidates across constituencies, and the party or G.D.V. Kusuma (2018) analysed the impact of elections on
coalition with a majority of seats (at least 272) is invited to
the National Stock Exchange (NSE) and Bombay Stock
form the government.
Exchange (BSE) indices, focusing on short- and medium-
The Lok Sabha elections play a critical role in shaping term volatility. Kusuma's study reveals that markets
India's political and economic landscape. Political stability experience significant fluctuations during election periods,
directly influences government policies, investor sentiment, driven by investor speculation and sentiment. This implies
stock prices, and foreign capital inflows. During election that exit polls, which provide early indicators of electoral
periods, financial markets experience increased volatility outcomes, may similarly affect stock market volatility, as
due to policy uncertainty. Investors rely on exit polls, investors adjust their portfolios based on expected political
macroeconomic indicators, and election results to make changes. (Balaji C., 2018)
investment decisions. Informal betting markets, such as the
Jatinder Loomba (2014) investigated the Indian stock
Phalodi Betting Market, also serve as alternative indicators
market's response to political leaders using EGARCH
of public sentiment, potentially impacting short-term models. His research indicates that investor confidence is
market trends. closely linked to political leadership, suggesting that
favourable exit poll results for a particular leader could lead
to bullish market behaviour, while negative polls might
OBJECTIVES
trigger bearish sentiment. This relationship highlights the
This study aims to: relevance of exit polls in shaping market perceptions and
1. Examine how Lok Sabha elections affect stock market reactions. (Loomba, 2014)
volatility, investor sentiment, and trading patterns. Kavita Chavali (2020) studied the market's response to
2. Analyze the accuracy of exit polls in predicting market consecutive election wins using event study methodology.
movements and their influence on investment decisions. Chavali's findings suggest that markets tend to react
positively to clear electoral victories, which can be
3. Proposing use of Deep Tech MARL model in predicting
and forecasting how Lok Sabha elections impact financial extrapolated to the context of exit polls. When exit polls
markets predict a strong lead for a candidate, it may enhance investor

Corresponding author: rohanagarwalconnect@gmail.com
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Institute of Management Development and Research, Pune
Cite this Paper :
Rohan, A.,Vishwas, M., Abhijeet, S., (2025)
Impact of Lok Sabha Exit Polls on Capital Markets: A Deep Tech Perspective, JMDR
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