Indian stock markets experienced a steep decline as preliminary results from the vote counting process indicated that the alliance led by Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) is not expected to secure a resounding victory, as anticipated by weekend exit polls.
The Nifty index dropped by as much as 3.76%, and the BSE index fell to a low of 73,659.29 points, down 3.67% on the day. Both indexes had touched lifetime highs just the day before.
Traders said the markets were selling off on Tuesday as investors awaited more clarity on the total number seats that the NDA would win.
The Lok Sabha elections results 2024 led to a major nervousness in the stock market resulting in worst market crash in four years.
The Indian stock markets had anticipated that the BJP-led National Democratic Alliance (NDA) will win more than 300 seats.
Nifty 50, India’s key benchmark index, extended early losses and closed deep in the red on Tuesday, a day after markets clocked the best trading session in three years.
Markets witnessed a big sell-off, as the vote counting showed uncertainty over a victory by a decisive majority for the Prime Minister Narendra Modi-led Bharatiya Janata Party (BJP) alliance when compared to the predictions by the exit polls over the weekend.
The National Stock Exchange (NSE) Nifty 50 ended nearly 5.50% lower on the day to settle near 22,000.
Amisha Vora, Chairperson & MD, Prabhudas Lilladher, says that the market is likely to shed ‘Modi Premium’, which will lead to correction in PSU and infrastructure stocks.
“Once this turbulence stabilizes, attention will shift to the core macro factors affecting India. Investors should brace for volatility in the short term, but the underlying fundamentals of India’s growth story remain strong,” Vora said.
Looking at the history, stock markets tend to recover and even thrive in the longer term, despite initial volatility. For instance, even after the 2014 and 2019 elections, the Indian stock market saw significant gains in the months following the election results.
Investors were rattled after the Bharatiya Janata Party (BJP) failed to cross the halfway mark in the lower house of the Parliament and secure a clear majority. However, the BJP-led National Democratic Alliance (NDA) managed only a slim majority to form the government at the Centre.
The impact of India’s election results on economic growth is multifaceted. While the stock market initially reacted with losses due to uncertainty, the long-term effects depend on policy decisions and investor confidence. If the BJP/NDA coalition forms a stable government, it could continue pro-business reforms, attract investments, and promote economic growth. However, prolonged political instability or policy reversals might hinder progress. Overall, the election outcome will shape India’s economic trajectory in the coming years.
