India’s financial markets experienced their most severe one-day decline in approximately four years as the electoral results of Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) did not meet expectations.
The Nifty 50 index plummeted 5.93% on Tuesday, and the BSE Sensex tumbled 5.74%, both recording their most significant drops since 2020.
The All India Market Capitalization index, monitored on the Bombay Stock Exchange, shed over 31.06 trillion rupees, roughly equivalent to $371 billion, on June 4 alone.
The Tuesday debacle led the Sensex index to wipe out all its gains for the year in a single day, transforming a 5.85% year-to-date gain on Monday into a 0.22% year-to-date loss. Concurrently, the Nifty 50’s 7% year-to-date gain as of Monday dwindled to a modest 0.7% increase for the year.
On Wednesday, following the election results, the Nifty rebounded with a 0.7% gain, while the Sensex traded 0.26% higher. Modi is poised to secure a rare third term, with the BJP winning 240 seats in the lower house of parliament, though it lost its single-party majority in a closer-than-anticipated contest.
The BJP-led National Democratic Alliance (NDA) coalition, however, secured 294 seats, thereby retaining the parliamentary majority, surpassing the 272 seats needed to form the government.
In the 2019 general election, the BJP won 303 seats, and the NDA clinched 353 seats. Modi had confidently predicted in March that the NDA would surpass 400 seats.
The opposition coalition, the Indian National Developmental Inclusive Alliance (INDIA), spearheaded by the Indian National Congress, captured 233 seats — a considerably better outcome than forecasted.