Elections and Stock Market: Elections create uncertainty, making the stock market anticipate its future. Exit polls had predicted a significant victory for Modi, causing the markets to surge to all-time highs on Monday, June 3 as expectations of sustained economic growth buoyed investors.
However, as the trends started coming in on Tuesday morning, circumstances changed. As the Election race gets tighter than what was predicted by the exit polls, the stock market continues to stay in a state of turmoil. Anand James, Chief Market Strategist at Geojit Financial, said
"Since exit polls were at an extreme, anything that doesn't point to more strength is obviously a negative"
The Election Results 2024 Sensex Crash:
Today at 10 am, the Sensex dropped 1,678.12 points (2.19%) to 74,790.66, while the Nifty fell 530.05 points (2.28%) to 22,733.85. The Benchmark stock indices tanked by over 8%, marking the steepest decline since the onset of the COVID-19 pandemic. PSU stocks, particularly banking stocks, led a significant drop in today’s session, followed by Adani group stocks. The decline in Adani Group stocks today wiped out the previous gains.
In today's trading, Adani Total Gas saw the biggest drop, falling 18.5% to below ₹1,000, reaching a low of ₹912.05. Following closely, Adani Green Energy experienced an 18.3% decline to ₹1,664.95. Additionally, Adani Energy Solutions dropped by 14.2% to ₹1048.70, while Adani Power declined by 13.6% to ₹756. NDTV's stock plummeted by 13%, while Ambuja Cements and ACC both decreased by around 9% in intra-day trading.
The value of the Indian rupee decreased, dropping from 83.14 to 83.35 against the US dollar. These market movements indicate the impact of the current political climate, as the Lok Sabha election results did not meet market expectations. As the day proceeds, the Indian Stock Market continues to experience a plunge, causing substantial losses for investors. Reports indicate that investors' wealth decreased by an estimated ₹38 lakh crore in intraday trade.
How the Election Results Impact the Stock Market:
When a new government assumes power or when an opposition party retains control, it can result in significant policy changes that impact various industries and economic sectors in diverse ways. The major factor that influenced the market’s volatility in the 2024 Election Results could be:
The Exit Polls - Early forecasts often create unwarranted market fluctuations, either optimistic or pessimistic. Investors will closely monitor exit poll updates from major agencies. This was seen during the 2004 Elections as well.
Landslide victories in Elections often relate to decisive outcomes, as seen in the 1984, 2014 and 2019 Elections. This fosters a sense of stability and policy predictability in the market, boosting investor confidence. This is exactly what happened when the exit polls were released on Monday.
According to Nilesh Shah, MD of Kotak Mahindra AMC, the market correction is because the actual results of the 2024 general election are significantly lower than what the exit polls had indicated. In an interview with CNBC-TV18, he said “There could be some amount of derating if there is no political stability. Policy decisions will make a material impact.”
The BJP-led NDA Alliance is leading on around 290 seats while the INDI Alliance is rounding up to 230 seats. The counting is still underway, however, the NDA's target of acquiring 400 seats seems highly unlikely now.
Inputs by Agencies
Image Source: Multiple Agencies
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