Indian shares have their worst session in 4 years due to a narrower lead for Modi’s alliance

Indian stocks took a sharp dive of over 8 percent on Tuesday, marking their worst performance in four years and wiping out gains made in 2024. This plunge occurred as vote-counting trends indicated Prime Minister Narendra Modi’s alliance falling short of the predicted landslide victory.

Although Modi’s bloc seemed poised to secure a majority during the early stages of vote counting in the general election on Tuesday, the numbers fell well short of the landslide predicted in exit polls.

As of 12:41 pm, the NSE Nifty 50 index plummeted by 7.2 percent to 21,605 points, while the S&P BSE Sensex plunged by 6.6 percent to 71,366 points. The indices experienced declines of up to 8.5 percent, marking their worst session since the onset of the COVID-19 pandemic. This downturn comes after a surge of over 3 percent on Monday, following exit polls projecting a likely two-thirds majority for the BJP-led alliance in the lower house.

Despite Monday’s gains, the benchmarks are now down nearly 1 percent for the year. The ruling National Democratic Alliance was shown to be leading in nearly 300 seats, with 272 seats being the minimum required for a simple majority in the 543-member lower house of parliament.

The volatility index spiked to its highest level since February 2022 at 31.71, after seeing a decrease on Monday.

“Since exit polls were at an extreme, anything that doesn’t point to more strength is obviously a negative,” said Anand James, chief market strategist at Geojit Financial.

“All sectors were in the red. Banks fell 7.9pc, realty dropped 9.3pc, infrastructure declined 13pc, while oil and gas stocks lost 11.7pc and state-run companies and public-sector banks retreated 19pc and 18pc, respectively.”

Adani Enterprises and Adani Ports lead losses with a 25pc fall each in Nifty 50 index. Other Adani group stocks were down between 9pc-20pc.

“The fear of the market is whether present numbers will stay or will reduce further. (Even at current majority) there will be some element of disappointment as they are below market expectations,” said Mayuresh Joshi, head- equity research India at William O’Neil and Company.

“Markets were at an all-time high, a lot of hope was built up (on BJP’s majority) and these will unwind over the next few sessions and the focus will turn to policy announcements as the reforms will any way continue with BJP getting an absolute mandate,” Joshi said.

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