The Indian stock market experienced a significant downturn on the day Lok Sabha election results were announced. The incumbent Bharatiya Janata Party (BJP), which had dominated Indian politics for the past decade, performed below expectations, leading to widespread market anxiety. As the results unfolded, the BJP-led National Democratic Alliance (NDA) was leading in nearly 300 seats, while the INDIA alliance was ahead in 229 seats, according to data from the Election Commission of India.
The possibility of a coalition government led by the BJP has caused market instability and a sharp decline in stock indices. Investors had anticipated a strong BJP majority, given the party’s pro-industry stance, which has historically favored economic growth and market stability. The uncertainty surrounding the formation of a stable government and the potential shift away from economic reforms contributed to the market’s negative reaction.
At the closing bell, the Sensex dropped to 72,079.05 points, down by 4,389.73 points or 5.74%, marking its worst session in over four years. The Nifty closed at 21,884.50 points, a decline of 1,379.40 points or 5.93%. Nearly all Nifty sectoral indices, except Nifty FMCG, suffered significant losses. Nifty Metal, Nifty Bank, Nifty Financial Services, Nifty PSU Bank, Nifty Private Bank, Nifty Realty, and Nifty Oil and Gas experienced the most substantial declines, as per NSE data.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, explained, “The steep fall is due to the results so far falling short of the exit polls which the market had discounted yesterday. If BJP doesn’t get a majority on its own there will be disappointment and this is getting reflected in the market. Also, it is possible that Modi 3.0 may not be as reform-oriented as the market expected and may turn more welfare-oriented.”
READ MORE : Election Results Shake Indian Markets: Sensex Drops 2000 Points, Nifty Falls 600 Points
During the afternoon, equity indices plummeted over 8%, reflecting the closer-than-anticipated fight for the NDA government. The Sensex’s performance mirrored its worst days during the COVID-19 pandemic. Jaykrishna Gandhi, Head of Business Development, Institutional Equities at Emkay Global Financial Services, noted, “Markets rallied 3-3.5 per cent on expectation of a Modi led NDA win on Monday. PSU (especially banks) led the rally. Today polls were not in line with exit poll outcome. Markets move more than 4-5 per cent down today.”
Gandhi further predicted a 7-10% downside for broader markets from current levels and recommended shifting positions from alpha stocks to defensives, advising investors to add FMCG, IT, and Pharma stocks while shorting stocks like ABB, Siemens, Cummins, Coal India, NTPC, PFC, REC, PNB, and Canara Bank.
The Rupee also weakened against the US dollar, closing at 83.53, a depreciation of 38 paise from Monday’s close of 83.15. Jateen Trivedi, VP Research Analyst – Commodity and Currency at LKP Securities, highlighted the potential for further depreciation, with the exchange rate possibly reaching 83.90.
Manish Chowdhury, Head of Research at StoxBox, commented on the market’s sharp reaction to the initial trends, “Markets have reacted sharply to the initial trends of the NDA leading on around 290 seats, way less than as projected. With the NDA still looking to form a government, though with the important support of coalition partners, markets look jittery about the prospects of strong decision making. Markets believe that the reformistic approach, which was a hallmark of the previous two terms, might take a backseat in the third term. However, our sense is that it is still early to jump to conclusions and should ideally wait for a clearer picture.”
Shrikant Chouhan, Head of Equity Research at Kotak Securities, advised traders to remain cautious, given the current market volatility and uncertainty, recommending a wait-and-see approach for the next few trading sessions.
On the previous day, Indian benchmark indices had closed at record highs due to investor optimism after exit polls indicated a comfortable majority for the NDA government. The Nifty 50 index gained 733.20 points, closing at 23,263.90, while the BSE Sensex surged 2,507.47 points to close at 76,468.78.
