Indian stock markets experienced a significant drop today following a sharp rally in the previous session.
Early vote-counting trends indicated that Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP)-led alliance was leading in over 272 seats, though the extent of the victory remained unclear.
As of 9:30 am, the NSE Nifty 50 index had fallen by 3.03% to 22,557, and the S&P BSE Sensex dropped by 3% to 74,107.
On Monday, the benchmarks surged over 3%, reaching record highs and achieving their best session in nearly 40 months after exit polls suggested the BJP-led alliance might secure a two-thirds majority in the lower house.
According to early trends, the NDA is leading in 288 seats, while the INDIA bloc is ahead in 213 seats.
The biggest laggards in the 30-company Sensex were State Bank of India, Reliance, Larsen & Toubro, Power Grid, NTPC, and HDFC Bank.
Foreign Institutional Investors (FIIs) purchased equities worth ₹6,850.76 crore on Monday, according to exchange data.
In Asian markets, Seoul, Tokyo, and Shanghai were trading lower, while Hong Kong showed gains.
US markets ended with mixed results on Monday. The global oil benchmark Brent crude declined by 0.68% to $77.83 a barrel.
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The Lok Sabha Elections 2024 will culminate on June 4, determining which political party will lead the country.
Experts predict that the BJP-led NDA will return to power, potentially causing a significant rise in the stock market.
However, some experts express concerns that if the BJP-led NDA wins fewer seats than expected,
the stock market may experience substantial corrections.
Market Reactions to Election Outcomes
An equity expert points out that unexpected election results could lead to a sharp decline in small-cap stocks and funds.
Ravi Saraogi, co-founder of Samasti Advisors, notes that many investors are holding cash and waiting for the election results, as the market’s reaction remains uncertain.
He advises a cautious approach.
Anirudh Garg, partner and head of research at Invaset, PMS, predicts that a strong BJP majority would positively influence the market.
Conversely, if the BJP falls short of a majority, it would create market uncertainty and short-term volatility.
He warns that an unexpected non-BJP government could lead to a market crash similar to the one in 2004 when the Congress party unexpectedly formed the government.
Ravi Singh, SVP of Retail Research at Religare Broking,
agrees that a strong Modi government majority would likely trigger a favorable market reaction.
Investor Strategies and Sector Focus
Experts advise investors to focus on long-term goals and avoid reacting to short-term market volatility associated with the election results.
Instead of getting swayed by immediate market fluctuations, investors should maintain a long-term perspective.
Before the election results, certain sectors are under focus, including Power, Tourism, Realty, Infrastructure, and Electronics System Design and Manufacturing (ESDM).
If the BJP-led government returns, stocks in these sectors could see significant gains.
