The Indian stock market witnessed a significant crash as benchmark indices Sensex and Nifty 50 both plummeted by 8%. This dramatic drop came as early voting trends from the 2024 Lok Sabha elections indicated that the ruling BJP-led alliance might secure only a slim majority, falling short of the exit poll predictions.
The sharp decline in the market saw BSE-listed companies losing nearly ₹40 lakh crore in market capitalization. All sectoral indices were trading with substantial losses, with public sector unit (PSU) stocks being particularly affected.
This market reaction stands in stark contrast to the optimistic projections made by Prime Minister Narendra Modi and Union Home Minister Amit Shah just last month. Both leaders had predicted a robust market rally on June 4, coinciding with the announcement of the election results. Shah had even encouraged investors to purchase stocks before June 4, confidently forecasting that the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) would win over 400 seats, ensuring a stable Modi government and a surging market.
Contrary to these predictions, the early trends showed the NDA leading in fewer than 300 seats, with the BJP itself struggling to cross the halfway mark of 272 seats required for a majority. This discrepancy between the anticipated landslide victory and the actual voting trends caused significant market turmoil.
Jyoti Prakash Gadia, Managing Director at Resurgent India, commented on the unfolding situation: “As the trends are emerging, the landslide victory as predicted by the exit polls does not seem to be happening. This is likely to make the government reconsider its approach to difficult economic reforms, which may not be as aggressive as earlier anticipated. However, the emphasis may shift partly to ground-level welfare schemes and employment generation.”
Gadia believes that despite the immediate market reaction, the overall growth trajectory may remain stable, with a continued emphasis on infrastructure development, which could emerge as a long-term consensus strategy.
By 12:25 PM, the Sensex had plunged 5,157.44 points, or 6.74%, settling at 71,311.34. Meanwhile, the Nifty 50 had crashed 1,638.05 points, or 7.04%, dropping to 21,625.85. This decline marks the biggest single-day fall for both indices in more than two years, with the Nifty 50 slipping below the 22,000 level.
As the market continues to react to the evolving political landscape, investors and analysts will be closely watching the final election results and subsequent government announcements. The BJP-led alliance’s ability to form a stable government will be crucial in restoring market confidence and determining the future direction of economic policies and reforms.
