On Monday, Indian benchmark indices had closed at record highs after exit polls indicated a comfortable majority for the NDA government
Our Bureau
Mumbai
Indian stock indices witnessed a bloodbath on the day the Lok Sabha were announced, where incumbent BJP performed below par and fell short of exit poll predictions and the majority mark on its own.
The idea of a coalition government lead by BJP at the center has led to widespread market anxiety and a sharp decline in stock indices. The BJP, which has been the dominant force in Indian politics for the past decade, is seen as a pro-Industry party whose policies have generally favored economic growth and market stability. The failure to secure a clear majority to BJP of its own raises concerns about the formation of a stable government and the continuation of economic reforms.
At the closing bell, Sensex closed at 72,079.05 points, down 4,389.73 points or 5.74 per cent, while Nifty closed at 21,884.50 points, down 1,379.40 points or 5.93 per cent. All Nifty sectoral indices, barring Nifty FMCG, were deep in the red today. Nifty metal, Nifty bank, Nifty financial services, Nifty PSU bank, Nifty private bank, Nifty realty, Nifty oil and gas, slumped the most, NSE data showed.
“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.O may not be as reform-oriented as the market expected and may turn more welfare- oriented,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
At one point during the afternoon, Indian equity indices plummeted over 8 per cent on Tuesday, as poll trends indicated a closer than anticipated fight for the incumbent Narendra Modi-led NDA government. Sensex logged it worst session in over four years, it witnessed back during Covid days.
The Rupee closed weaker against the US dollar on Tuesday, depreciating by 38 paise to close at 83.53. It closed at 83.15 on Monday. The Rupee had been largely steady for the past year, largely due to RBI’s intervention.
“This uncertainty triggered a panic sell-off across various asset classes, impacting economic growth. The Dollar-Rupee exchange rate may continue to rise, potentially reaching 83.90, with 83.40 serving as the immediate support level,” said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.
Manish Chowdhury, Head of Research, StoxBox, asserted that 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,” said Chowdhury.
On Monday, Indian benchmark indices had closed at record highs, driven by fresh buying from investors after exit polls indicated a comfortable majority for the NDA government. After the stock market opened with an unprecedented uptick on Monday, Bharatiya Janata Party leader Shehzad Poonawalla on Monday said that markets are confident about BJP returning to power.
The stock market reached an all-time high after exit polls forecast a decisive victory for the BJP-led NDA coalition, sparking widespread investor optimism on Monday.
“After the media’s exit polls, now the markets in a sense, barometer of what they are expecting to happen on June 4 has also come about when the Sensex and Nifty have shown a huge hike of almost 2000+ points. It shows that the confidence, not just the markets but also the people of India bestowed upon Modi govt. This is just one of the indicators,” Poonawalla said.
But Samajwadi Party chief Akhilesh Yadav said that it is because people are trying to earn a profit and tomorrow, they will get away. Akhilesh said, “This (Sensex-Nifty mark record highs) is because people are trying to earn a profit, tomorrow they will get away. Amul has increased the price of milk by Rs 2 to improve your health. They have increased prices to help their people earn profits. There is a possibility that they will have a slow counting and have power cuts at night.”
