Pedestrians walk past a digital broadcast displaying stock prices on the facade of the Bombay Stock Exchange (BSE) on the day of the Indian general election results in Mumbai, June 4, 2024.
Paranjpe Punishment | Afp | Getty Images
Indian markets suffered their worst one-day loss in about four years as election results for Prime Minister Narendra Modi’s ruling Bharatiya Janata Party failed to meet expectations.
THE Clever 50 plunged 5.93% on Tuesday, while the BSE Sensex lost 5.74%, marking its biggest loss since 2020.
The All India Market Capitalization Index, followed by the Bombay Stock Index, lost over Rs 31.06 trillion, or around $371 billion, on June 4 alone.
Tuesday’s losses mean the Sensex erased all of its gains this year in a single day, falling from a year-to-date gain of 5.85% on Monday to a loss position of 0.22 %.
Meanwhile, the Nifty 50 saw its 7% year-to-date gain on Monday fall to a meager 0.7% year-to-date increase.
Modi is poised to secure a rare third term in power, with the BJP winning 240 seats in the lower house of Parliament but losing its single-party majority in a tighter-than-expected race.
The BJP-led National Democratic Alliance (NDA) coalition, however, won 294 seats, managing to retain a parliamentary majority, surpassing the 272 required to form the government.
In the previous general elections in 2019, the BJP secured 303 seats and the NDA 353 seats. Modi reportedly said in March that he was confident the NDA would get more than 400 seats.
The opposition coalition Indian National Developmental Inclusive Alliance, or INDIA, led by the Indian National Congress, won 233 seats – a much better result than expected.
A Goldman Sachs report released Wednesday said that “even with a reduced majority, we do not believe macroeconomic stability will be compromised.”
However, a weaker mandate would make it more difficult to implement structural policy changes, such as land reforms to support manufacturing growth and agricultural sector reforms to improve agricultural productivity growth.
This is the first time in the last ten years that the BJP will lead a government without a majority in the Lok Sabha – the lower house of Parliament – Goldman analysts said.
The main challenge for Modi’s party will therefore be to manage the coalition partners, who are likely to negotiate key ministerial appointments.
“We believe the government will stick to the announced fiscal consolidation trajectory of 5.1% of GDP this fiscal year, although we expect some reallocation of spending towards social assistance,” the analysts concluded .
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