With the BJP failing to even get a simple majority of 272 seats, investors saw sentiment waterfalling to pandemic lows.  A man watches a digital screen displaying stock numbers outside the Bombay Stock Exchange (BSE) building in Mumbai on June 4, 2024. Indian stock market witnessed a severe downturn on Tuesday with both the Sensex and Nifty taking a massive hit amidst election uncertainties.(Photo | PTI)

The Indian stock markets suffered a very red day on Tuesday.  Prices fell as though gravity was working its wicked will after the thrill of the NDA’s third term got clouded as PM Modi’s BJP suffered a shock in UP and lost around 60 seats in comparison to 2019.

With the BJP failing to even get a simple majority of 272 seats, investors saw sentiment waterfalling to pandemic lows.

The benchmark Sensex absorbed a savage trouncing losing 6,200 points to 70,234 points, while Nifty50 plunged below 21,300 levels in intra trade — logging their worst session in over four years. At close, Nifty was down a dazed 5.93% or 1379.4 points at 21885, while Sensex too saw similar lacings to end at 4,390 points, or 5.74% lower than the previous close.

Surprisingly, shares of heavyweights including Reliance Industries, HDFC Bank, SBI and others came hammering down weighing on the benchmark index. Shares of Adani Group too got knocked 180 degrees off, erasing all the gains made in the previous sessions.

In all, Tuesday’s bloodbath hacked over Rs 31 lakh crore off investors’ wealth, while Nifty companies saw an erosion of over Rs 10 lakh crore. This wasn’t supposed to be. Exit polls had predicted a massive win for the BJP-led NDA just last Saturday, which markets lapped it up soaring Sensex to a lifetime high on Monday. Investors’ wealth saw a Rs 12.48 lakh crore glaze of glory.

Hours later, however, history failed to turn and as the BJP struggled to reach the 272-mark, a cocktail of sorrow and fear over policy continuity engulfed markets, causing a carnage.

The fact that the BJP-led NDA crossed the 290-mark and will likely form the government for the third consecutive term could have been the sparkle amid the grey, but optimism was dangling by a hangman’s sword. By 1pm, Sensex shed a colossal 6,200 points, an over 8% decline, but fortunately resisted hitting the circuit breaker.

In fact, markets were in heavier spirits during the initial phases of voting and the volatility index remained jumpy last month. Perhaps, they got a whiff of the election trends well in advance than political parties with the voter mood quotient reaching markets first, perhaps at the speed of light, traveling faster than sound.

But exit polls turned the mood music, predicting an electoral jackpot for the BJP-led NDA government for the third straight term. Markets were quick to cut a slice of the cake on Monday with Sensex and Nifty zooming over 3%, recording their biggest single-day gain in three years and closing at lifetime highs. The 30-share BSE Sensex soared by 2,507.47 points or 3.39% to settle at a new closing peak of 76,468 points. During the day, the barometer jumped 2,778 points or 3.75% to hit a record intra-day peak of 76,739. Likewise, Nifty jumped 733 points or 3.25% to finish at 23,264.

They were looking forward for a bigger blitzkrieg on Tuesday, hoping for a run-away rally with Sensex breaching past 80,000 levels, or a potential upside of over 8%. Instead, as counting began, equities faced a ‘ballot box bombshell,’ and thanks to the massive sell-off, the benchmark index tanked over 8%, confirming only one thing: That all exit polls have been wrong, wrong, and monstrously wrong.

What’s next?

The prospect of a coalition government was not even on the table until Tuesday morning, but became an inevitability by Tuesday evening.

If market sentiment remains sour, equities will continue pounding the down arrow. In general, investors don’t like anything other than stable governments, fearing a setback to the reforms momentum. Likewise, fears of fiscal indiscipline too will make markets jittery.