Sensex Plummets: Post Lok Sabha Election Results
The results of the Lok Sabha Election 2024 have been declared and its impact is visible on the stock market. Tuesday’s market concluded with a crash and Sensex has fallen too. Since March 2020, indexes witnessed their worst fall. The last two days of the market were completely the opposite, the Monday session ended on a good note whereas the Tuesday session ended on a bad note for investors. Speaking of Monday’s session, the market displayed the gain after exit polls projected that the BJP-led alliance would likely get a two-thirds majority in the lower house.
The News channels displayed the ruling National Democratic Alliance was ahead in nearly 300 seats. For a simple majority, a minimum of 272 seats is required in order to get a majority in the lower house of parliament. After dropping on Monday, the volatility index surged to its highest level since March 2022 at 29.79. Anand James, Chief market strategist of Geojit Financial has shared his views on the drastic change in the stock market after the results of the election. James said “Since exit polls were at an extreme, anything that doesn’t point to more strength is obviously a negative. Despite exit polls giving a resounding victory for the ruling party, the market volatility gauge did not go down below 20, as it was pricing in an outlier.”
All sectors witnessed a crash. Oil and gas stocks fell 11.7%, bank stocks dropped up to 7.8%, realty fell 9.1%, state-run companies declined 17%, banks retreated 16% and infrastructure dropped 10.5%. If we look at the Nifty 50 index, Adani Enterprises and Adani Ports were in the red and falling 19% each. Whereas other stocks of Adani Group fell between 9-19%. Noteworthy, the group stocks had surged between 4%-18% after exit polls on Monday, 3 June 2024.
The head-equity research India of William O’Neil and Company, Mayuresh Joshi said, “The fear of the market is whether present numbers will stay or will reduce further. (Even at the current majority) there will be some element of disappointment as they are below market expectations.”
Joshi further added, “Markets were at an all-time high, a lot of hope was built up (on BJP’s majority) and these will unwind over the next few sessions and the focus will turn on policy announcements as the reforms will anyway continue with BJP getting an absolute mandate.”
After watching the stock market, Bernstein kept its view of high single-digit returns in the market and kept its Nifty target unchanged at 23,500. As per Bernstein, the brokerage expects volatility to remain owing to uncertainty on the policy path. Due to the BJP’s inability to secure a majority on its own, Bernstein stated that the party will become more independent of its allies, whether or not seat-sharing agreements are signed before the election.
Bernstein said, “There are no contentious topics, as the NDA had a consensus on policies. In an extreme scenario, if the opposition manages to wrest away the key allies, the investment approach to India would change materially. As we consider it a low-probability event, we do not delve much into this topic.”
Berstein also assumes that the focus of the new government could change as policies could be tweaked in order to pay attention to spending towards direct social schemes. It said, “With capex likely to be driven more by the private sector as end markets are changing, the role of government will in any case moderate over time, limiting material risks to the cycle.”
