On Tuesday, contrary to exit poll predictions of a resounding election mandate for the ruling BJP, voters left the ruling party 31 short of the majority mark and made it dependent on allies such as TDP and JD(U).As a result, investors now expect that the new govt will not be able to take some of the bold policy decisions to push the economy along the strong economic growth path that it’s already on.
As the initial poll results trickled in, sensex opened about 200 points down but then heavy selling pulled it down by over 6,000 points. After some late buying, the index closed at 72,079 points, still down 4,390 points or 5.7% — the biggest single-session loss in its history. On the NSE, the nifty lost 1,379 points or 5.9% at 21,884 points.
At one point during the day’s session, the nifty was just about 150 points off hitting the 10% lower circuit level, which would have stopped trading across all bourses for at least an hour. The day’s market crash left investors poorer by Rs 31 lakh crore with BSE’s market capitalisation now at Rs 401.2 lakh crore, translating to $4.8 trillion.
Among the sensex stocks only three — HUL, Nestle and TCS — closed higher while the other 27 of its constituents closed in the red. PSU stocks, which had seen a stellar run during the last two years, mainly on the back of pro-sector policies of the govt, crashed. Among the maharatna companies, NTPC crashed 15.5% and Powergrid Corp lost 12.4%, while SBI fell 14.4% down. As a result, BSE’s PSU index closed 15.7% down, BSE data showed.
During Tuesday’s session India VIX, the measure of volatility, spiked nearly 50%, touched a more than two-year high at 31.7 points and finally settled at 26.75, NSE data showed.
Brokers, however, said the slide in the market may soon halt as volatility reduces. “The broader market may turn volatile as sentiments get hit, but a major trend of the Indian equity market is expected to revive after the cooldown of volatility over the next couple of days,” said Ajay Menon, MD & CEO, Broking & Distribution, Motilal Oswal Financial Services. “The latest numbers suggest that the NDA govt could return to power with fewer seats than last time. We expect the volatility around the outcome to reduce over the next few days and the market to focus on returns on macro and fundamentals which continue to remain strong.”
Angry investors on the Street vented their anger at the exit pollsters for this debacle. In the days leading to the results on Tuesday, most forecasts had predicted a thumping majority, a far cry from what the actual numbers showed.