Indian Stock Market crash: Worst in 4 years as Modi-led alliance

Benchmark indexes had more than tripled in value since Modi became prime minister in May 2014, as of Monday’s close.

NEW DELHI: Indian stocks suffered their worst intraday fall since March 2020 on Tuesday, as vote counting trends in the general election suggested Prime Minister Narendra Modi’s alliance was unlikely to win the overwhelming majority predicted by exit polls.

With over half the votes counted, Modi’s own Bharatiya Janata Party (BJP) looked unlikely to secure a majority on its own in the 543-member lower house of parliament and would need allies in the National Democratic Alliance (NDA) to form the government.

That could lead to some uncertainty over economic policies, such as the push for investment-led growth, which has been the cornerstone of the Modi government’s rule. The Indian economy grew 8.2% in the financial year ended March 2024.

“The key question is whether BJP can retain the single-party majority. If not, then would its coalition be able to deliver economic development, particularly infrastructure?” said Ken Peng, head of investment strategy, Asia, at Citi Global Wealth.

The NSE Nifty 50 index, opening a new tab closed down 5.93% at 21,884.5 points, and the S&P BSE Sensex (.BSESN), opening a new tab fell 5.74% to 72,079.05. The indexes fell as much as 8.5% earlier in the day, after hitting record highs on Monday.

At the day’s low, the indexes saw their biggest intraday fall since March 2020, when stocks were battered by the first lockdown during the COVID pandemic.

“Due to the dependency on coalition partners, the upcoming NDA government may shift its focus towards a welfare-oriented approach rather than concentrating on reforms during the July budget,” said Puneet Sharma, CEO and fund manager at Whitespace Alpha.

Indian markets are likely to now derate due to higher risk perception, said analysts at brokerage Emkay Global, which believes that difficult reforms like changes to land and labour policies, along with privatisation of state-run enterprises, were “off the table”.

Exit polls over the weekend had projected a big win for Modi’s NDA, catapulting markets to all-time highs on Monday as investors were buoyed by expectations of sustained economic growth.

Benchmark indexes had more than tripled in value since Modi became prime minister in May 2014, as of Monday’s close. Foreign investors, who poured a net $20.7 billion into Indian equities last year but pulled back ahead of the election, had been widely expected to turn buyers if the Modi alliance secured a decisive mandate.

They bought shares worth a net of 68.51 billion rupees ($824.4 million) on Monday. The lack of clarity on the margin of victory for the NDA saw intraday volatility on the share index rise to its highest level in 26 months.

The rupee ended at 83.53 against the dollar, down 0.5% on the day, marking its worst single-day fall in 16 months. The benchmark 10-year bond yield rose 10 basis points on the day, its biggest one-day rise in eight months, ending at 7.0382%.

INDIA bloc to take a call on Wednesday on approaching former partners: Rahul Gandhi

The INDIA bloc will meet and decide on Wednesday whether to approach former partners such as the JD(U) and the TDP to attempt government formation at the Centre, Congress leader Rahul Gandhi said.

“We are going to have a meeting with our partners tomorrow. These questions will be raised and answered there,” Gandhi told a press conference here when asked if the Congress and its allies will approach parties that are part of the NDA to try and form a government.

He was addressing the press conference with senior Congress leaders as the Lok Sabha poll results and trends showed the BJP was set to become the single-largest party but would fall short of the magic figure of 272.

“We won’t say anything without asking the opinion of our allies. Our alliance will decide tomorrow and whatever they decide we will act on that,” he said.

He also said the general elections were a fight to save the Constitution. “India’s poorest and backward stood up to save the Constitution.”