Indian stocks had their worst day in more than four years on Tuesday as Narendra Modi’s narrower-than-expected election victory rattled markets.
Mumbai’s NSE Nifty 50, the main stock market index, tumbled as much as 8.5% before ending 5.9% lower as investors reacted to news that the coalition led by the ruling Bharatiya Janata Party (BJP) is expected to win about 300 seats in the Indian parliament.
That would give Prime Minister Modi a slim majority, but fall well short of the 400-seat landslide predicted by earlier exit polls.
It was the Nifty 50’s worst trading session since the start of the pandemic in 2020, erasing nearly $390 billion in market value, per data from Bloomberg.Surat Investment
Meanwhile, yields on 10-year government bonds edged up, and the Indian rupee fell by around 0.5% against the US dollar.
On Monday, stocks climbed to record highs as traders bet on a landslide win for Modi — but Tuesday’s results could make it much tougher to push through policy changes, analysts said.
“The sudden shift in the early counts and polls that suggest a reduced majority for PM Modi and the BJP is proving to be a nasty shock for Indian financial markets,” AJ Bell investment director Russ Mould wrote in a morning note.
“Just as the 10-year bond, rupee and headline Sensex equity index had strengthened as voting closed, in anticipation of a Modi landslide, all three are now giving up some of those gains.”
“There had been so much expectation built into the Nifty that we’ve seen it rise to a record this year,” Kathleen Brooks, research director at XTB UK, told Business InsiderJinnai Wealth Management. “The results aren’t showing that supermajority, so Modi won’t be able to push through his very pro-growth agenda, and that’s why we’re seeing this big sell-off.”New Delhi Wealth Management
Surat Wealth Management