Voter heat on BJP melts stock markets

The Sensex opened over 1,700 points down on the opening, while the Nifty began trading down 830 points. As more rounds of counting established that the BJP was not having an easy victory, the bloodbath began with Sensex plunging by 5,000 points or 6.5 per cent and the Nifty by over 1,600 points.

By 12:45 pm, the Sensex plunged over 6,000 points or over 8 per cent. The panic among investors wiped out Rs 45 lakh crore from the market capitalisation of all listed companies on BSE — the worst day since Covid lockdown induced meltdown in 2020. By the end of the day, the Sensex lost 4,389.73 points, ending at 72,079.05 points. The Nifty closed the day down 1,379.40 points at 21,884.50 points.

Volatility index, which measures volatility in stock markets, hit 39 per cent — the biggest rise in the last nine years — and ended the day at 26.20 as investors found election results difficult to accept. The stock markets erased all gains that were registered in the year 2024 within a matter of hours.

Companies, which performed well during the Narendra Modi government, were badly mauled in the meltdown. Leading the pack was Adani Enterprises, the flagship company of the Adani Group, lost 19.35 per cent or nearly Rs 700 per share. It touched the lower circuit four times during the trading session on Tuesday. The Adani group alone lost Rs 19 lakh crore market capitalisation.

In the Adani pack, Adani Ports & SEZ lost 21.40 per cent, Adani Energy Solutions dropped 20 per cent, NDTV 19.25 per cent, Adani Green Energy 19.43 per cent, ATGL 18.53 per cent, Adani Power 17.55 per cent, Ambuja Cements 16.10 per cent, ACC 15.01 per cent and Adani Wilmar 9.99 per cent.

All key sectors, except FMCG, experienced significant losses, with PSUs, energy, and metals being the hardest hit. The broader indices also suffered, each losing around eight per cent.

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

Explaining reasons for the meltdown, Vinod Nair, head of research, Geojit Financial Services, said: “The unexpected outcome of the general election sparked a wave of fear selling in the domestic market, reversing the recent substantial rally. Despite this, 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.”

The election result, he said, is likely to lead to a major shift in political policy with a focus on social economics, which will have a positive effect on the rural economy.

However, he said the sectors that have topped in the past five years, including power, capital goods, real estate, and industrials are advised to exercise caution in the near term. Nevertheless, the long-term growth prospects for these sectors remain robust.

Trade analysts expect volatility could continue in the markets as investors dislike coalition governments which result in slower decision making. They also advised investors to limit their trades and wait for stability.

“We are of the view that the current market texture is extremely volatile and uncertain; hence, it is advisable that traders should remain cautious for the next few trading sessions,” said Shrikant Chouhan, head, equity research, Kotak Securities.