Behind the bleed: Sensex, Nifty crash 6% as election results hit exit poll ecstasy

It has been a tough day for the stock market. From the euphoric state in the previous session, to a bloodbath not seen in at least a decade, the shock delivered by early results of the Lok Sabha elections has had a strong impact on the bourses.

The situation took a complete 360 degree turn from BSE Sensex and Nifty 50 touching their life-time highs on June 3, ending almost 6 per cent down on Tuesday.

BSE Sensex feel 4,389.73 points or 5.74 per cent to close at 72,079.05, while Nifty 50 ended day’s trade at 21,884.50, down 5.93 per cent or 1,379.40 points.

During the day, BSE Sensex tumbled over 6,000 points. For the Indian stock market, it was a ’terrifying Tuesday’ as it witnessed worst fall in over 4 years.

As many as 3,093 shares declined, about 331 advanced, and 55 were unchanged.

BSE Midcap index shed as much as 8 per cent and smallcap index tumbled nearly 7 per cent.

Why Indian stock market ended in red?

The Indian benchmark indices witnessed a bloodbath on Tuesday as the counting of Lok Sabha election 2024 results showed Prime Minister Narendra Modi’s BJP-led NDA over the majority mark but not registering a landslide victory as predicted by most exit polls.

The counting of votes is still underway and the latest trends show the Congress-led INDI Alliance giving a tough fight to the NDA, which is shy from reaching the 300-mark. The Opposition bloc is leading in at least 227 seats.

“The unexpected outcome of the general election sparked a wave of fear selling in the domestic market, reversing the recent substantial rally,” Vinod Nair, Head of Research, Geojit Financial Services, said.

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According Narendra Solanki, Head Fundamental Research - Investment Services, Anand Rathi Shares and Stock Brokers, the larger part of the fall in the stock market was more due to high expectations build up in the markets.

“The Lok Sabha election results had a pronounced impact on the market, reflecting the intense political competition. Initial market optimism was based on expectations of a strong performance by the NDA,” Mandar Bhojane, Equity Research Analyst, Choice Broking, said.

Biggest losers

Except FMCG, all other sectoral indices ended in the red. Realty, Telecom, Metal, Capital Goods, Oil & Gas, Power, PSU Bank were down over 10 per cent each.

Also Read: Stock market bloodbath: Why Nifty, Sensex tanked over 5% despite BJP leading

In Nifty, biggest losers included Adani Ports, Adani Enterprises, ONGC, NTPC and SBI, while gainers were HUL, Nestle, Britannia Industries, Hero MotoCorp and Tata Consumer Products.

Brace for more turbulence

“The India VIX surged by 31 per cent, reaching 31.71 before settling at 26.7475, highlighting increased volatility and market fluctuations in response to the election results. This spike in volatility suggests that traders and investors should brace for continued turbulence,” Bhojane said.

What to expect next?

“We think this volatility should give chance to investors to add good stocks for long term growth as we continue to remain positive on overall growth prospects of the economy and the short term volatility to reduce as final counting concludes and clear picture emerges. We still expect incumbent government has high chances of coming back in power albeit with lower than expected seats,” Solanki said.

Meanwhile, Nair said the market maintains its expectation of stability within the coalition, led by BJP as the major election winner, thereby mitigating substantial downside in the medium-term.

“Following a sharp 1,200-point drop, the Nifty exhibited a volatile range between 21,200 and 23,200, resulting in a significant spread of over 2,000 points. The index formed a substantial bearish candle, with key support levels identified at 21,400 and 21,200. If these levels fail to hold, the next supports are at 20,800 and 20,300. On the upside, the Nifty needs to break above 22,800 and 23,000 to regain strength and potentially reach new all-time highs of 23,500 and 23,700,” Bhojane said.

“We expect the volatility around the outcome to reduce over the next few days and market focus to return on macro and fundamentals which continue to remain strong,” Ajay Menon, MD & CEO, Broking & Distribution, Motilal Oswal Financial Services, said.

“Once the new government is formed, it will present its first and full budget for FY25 in the next few weeks, where themes like capex, manufacturing, rural, consumption, and credit lending will be back in focus. The rural and consumption theme would also pick up pace with the onset and progress of Monsoon, which is predicted to be above normal this year. While the market volatility may continue in the near term, retail investors should take this correction as an opportunity to accumulate quality names in 3-4 tranches. Over the next few days, the narrative around government formation and RBI monetary policy would take centre stage,” Menon further said.