Prime Minister Narendra Modi has succeeded in his third consecutive term in the Indian general elections.
Contrary to the exit poll results predicting a landslide victory for Modi’s ruling party, the Bharatiya Janata Party (BJP), the main stock market index in India plummeted as the BJP failed to secure a majority of seats during the count on the 4th.
The BSE Sensex index of the Mumbai stock market plummeted by 4389.73 points (5.74%), marking its worst performance in over four years at 72,079.05.
Additionally, the Nifty 50, which represents the weighted average of India’s top 50 companies listed on the U.S. stock exchange, fell by 5.9%.
The crash in the Indian stock market stemmed from the disparity between exit poll predictions and the final count. Initially, the exit polls announced on the 1st showed an undeniable victory for the ruling BJP in the Indian general elections
The Lok Sabha, the lower house of the Indian Parliament is composed of 543 seats, with a winning threshold set at half or 272 seats.
Most exit polls over the weekend predicted that Modi’s BJP would exceed the 303 seats it won in the 2019 general elections and that the alliance would secure more than two-thirds of the seats in Parliament.
Accordingly, the Indian stock market rose on Monday, with the Sensex recording a 3.4% increase to 76,468.78, marking the largest single-day surge in over three years.
However, the final result saw Modi’s ruling BJP party securing a total of 240 seats, thus securing victory.
Although the ruling party secured a majority of seats, confirming Modi’s third term, Modi will not be able to govern without the support of minority coalition partners due to the weakened BJP.
This is seen as a result of rising unemployment and inflation in India.
Similar to the past before Modi first came to power ten years ago, India is expected to slow down its pace of reform as it pursues reform through consensus rather than strong leadership.
Shares of Reliance Industries, owned by Indian billionaire Mukesh Ambani, fell by 7.5%, and shares of companies in the Adani Group, owned by Asia’s richest man Gautam Adani, also took a hit.
Adani Enterprises fell by 19%, while Adani Power and Adani Ports and Special Economic Zone fell by 17% and 21%, respectively.
Financial stocks also suffered, with ICICI Bank falling 7.5% and State Bank of India, the largest public sector bank in India, falling 14%.
The Indian Rupee showed a slight weakness of about 0.5% against the U.S. dollar.
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