In the biggest single-day fall in four years, benchmark stock indices Sensex and Nifty plunged by nearly 6 per cent on Tuesday as vote counting trends showed the BJP may not have a clear majority in the Lok Sabha polls.

Reversing its Monday’s sharp gains of over 3 per cent, the 30-share BSE Sensex nosedived 4,389.73 points or 5.74 per cent to close at a more than two-month low of 72,079.05. In the day trade, the barometer tanked 6,234.35 points or 8.15 per cent to hit a nearly five-month low level of 70,234.43.

The NSE Nifty tumbled 1,982.45 points or 8.52 per cent to 21,281.45 during the day. Later, it ended at 21,884.50, a sharp decline of 1,379.40 points or 5.93 per cent. Sensex and Nifty had previously declined by around 13 per cent on March 23, 2020, when lockdown was imposed due to the COVID-19 pandemic.

Heavy profit booking in PSUs, public banks, power, utilities, energy, oil and gas, and capital goods shares dragged the markets into the deep negative.

“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.

“This 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,” said Vinod Nair, Head of Research, Geojit Financial Services.

Vote counting trends showed that the BJP was poised to be the single largest party but could be well short of an absolute majority, leaving it dependent on its NDA partners to form government.

When the Narendra Modi government came to power on May 16, 2014, Sensex had rallied 261.14 points or 0.90 per cent to settle at 24,121.74, and Nifty jumped 79.85 points or 1.12 per cent to 7,203. The BSE benchmark had hit the 25,000-mark in intra-day trade on that day.

On May 23, 2019, the Sensex declined 298.82 points or 0.76 per cent to settle at 38,811.39, while the Nifty ended 80.85 points or 0.69 per cent lower at 11,657.05. The BSE benchmark had hit the 40,000-mark for the first time ever, while the Nifty breached the 12,000-level on that day.

Among the 30 Sensex companies, NTPC plunged over 15 per cent, while State Bank of India tanked more than 14 per cent, Larsen & Toubro tumbled over 12 per cent and Power Grid dived more than 12 per cent. Tata Steel, IndusInd Bank, Bharti Airtel, ICICI Bank, Axis Bank, Reliance Industries and JSW Steel were the other big laggards.

On the other hand, Hindustan Unilever jumped 6 per cent while Nestle climbed 3 per cent. Tata Consultancy Services, Asian Paints and Sun Pharma also emerged as the gainers.

All the sectoral indices, except for FMCG, closed in the red.

Adani group shares also declined. Adani Ports & SEZ tanked over 21 per cent, Adani Enterprises by nearly 20 per cent, Adani Power by 17 per cent, Adani Energy Solutions by 20 per cent and Adani Green Energy by over 19 per cent.

“Markets have reacted sharply to the initial trends of the NDA leading on around 290 seats which look way behind the exit polls which were projecting around 350-370 seats. With the NDA still looking to form a government, though with the important support of coalition partners, markets look jittery about the prospects of strong decision making.

“Markets believe that the reformistic approach, which was a hallmark of the previous two terms, might take a backseat in the third term. However, our sense is that it is still early to jump to conclusions and should ideally wait for a clearer picture,” said Manish Chowdhury, Head of Research, StoxBox.

In the broader market, the BSE midcap gauge tanked 8.07 per cent and smallcap index plunged 6.79 per cent.

Among the indices, utilities dived 14.40 per cent, power tumbled 14.25 per cent, oil and gas by 13.07 per cent, services by 12.65 per cent, capital goods by 12.06 per cent, energy by 11.62 per cent and metal by 9.65 per cent.

As many as 3,349 stocks declined while 488 advanced and 97 remained unchanged on the BSE. Also, 292 stocks hit their 52-week low, while 139 reached their one-year peak.

On the NSE, 2,438 stocks declined while 242 advanced and 70 were unchanged. The number of stocks to hit a 52-week high stood at 83 while 271 stocks fell to their 52-week low.

In Asian markets, Seoul and Tokyo settled lower while Shanghai and Hong Kong ended with gains. European markets were trading lower. US markets ended on a mixed note on Monday. Global oil benchmark Brent crude declined 1.88 per cent to USD 76.89 a barrel.

Markets jumped sharply on Monday after exit polls predicted a massive win for the BJP-led NDA in the Lok Sabha polls. The BSE benchmark soared by 2,507.47 points or 3.39 per cent to settle at a new closing peak of 76,468.78 on Monday, marking its biggest single-day gain in three years. The NSE Nifty climbed 733.20 points or 3.25 per cent to finish at 23,263.90.

Girls cover their face to protect themselves from the scorching heat on a hot summer day, in Jaipur. Image for representation
| Photo Credit: PTI

Marathon Lok Sabha polling exercise ends with seventh phase on June 1

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Heatwave claims 61 lives across India in a day

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17 more dead in landslips, floods in the Northeast

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Former U.S. President Trump speaks to members of the media after a jury found him guilty of all 34 felony counts in his criminal trial at New York State Supreme Court in New York.
| Photo Credit: Reuters

Donald Trump becomes first former U.S. President convicted of felony crimes

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SIT arrests Hassan MP Prajwal Revanna at Bengaluru airport after his return from Germany

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Narendra Modi begins meditation at Vivekananda Rock Memorial

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PM spoke on divisive issues over 400 times, but never mentioned unemployment, price rise, says Kharge

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Prajwal Revanna, grandson of JD(S) supremo H D Deve Gowda, is accused in an alleged rape and sexual harassment case involving a 47-year-old woman. File.
| Photo Credit: Reuters

‘Mahatma became popular only after Gandhi movie’: Congress attacks PM Modi over his comment

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SIT team camping at Bengaluru airport to arrest Prajwal Revanna

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Remal effect: Disaster death toll rises to 38 in northeast

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Kolkata Knight Riders players celebrate with the Indian Premier League (IPL) 2024 trophy after winning the final match against Sunrisers Hyderabad at MA Chidambaram Stadium, in Chennai.
| Photo Credit: PTI

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At least 27 people were killed in a fire at a sprawling children’s game zone built in a temporary structure in Rajkot on Saturday.
| Photo Credit: Special Arrangement

27 killed in blaze at Rajkot gaming zone

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Cyclone Remal: Kolkata airport to suspend flight operations for 21 hours from May 25 noon

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Approximate voter turnout trend of 54.37% recorded in Delhi

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Image used for representational purpose only.
| Photo Credit: The Hindu

Foreign investors pulled out a massive ₹17,000 crore from Indian equities in the first 10 days of the month owing to general election and the uncertainty surrounding its outcome coupled with expensive valuations and profit booking.

This was way higher than a net withdrawal of ₹8,700 crore in the entire April on concerns over a tweak in India’s tax treaty with Mauritius and a sustained rise in U.S. bond yields.

Before that, FPIs made a net investment of ₹35,098 crore in March and ₹1,539 crore in February. Looking ahead, post-general elections, corporate India’s strong financial performance in Q4 FY24 is anticipated to be rewarded.

While FPIs may adopt a cautious stance until the election results are clear, favourable outcomes and established political stability could see their return in significant numbers, Trivesh D., COO at Tradejini, said.

According to the data with the depositories, Foreign Portfolio Investors (FPIs) experienced a net outflow of ₹17,083 crore in equities this month (till May 10).

There are multiple reasons behind this aggressive selling by FPIs. With the ongoing general election and the uncertainty surrounding its outcome, investors are wary to enter the markets before the election results, Himanshu Srivastava, associate director – manager research, Morningstar Investment Research India, said.

Also, with Indian markets trading at relatively high valuations, many investors would have found this as an opportunity to book profit and wait until more clarity emerges on the country’s political landscape, he added.

“Given the current political uncertainty in India and with US interest rates still appealing, FPIs have shifted to a risk-off mode,” Krishna Appala, smallcase manager & senior research analyst at Capitalmind, said.

Another reason could be profit booking by FPIs in anticipation of a market correction, particularly around results day, Tradejini’s Mr. Trivesh said.

On the global front, the U.S. Fed has indicated no rate cuts until inflation cools, thus raising scepticism over the possibility of an early rate cut. It led to the appreciation in U.S. dollar leading to a surge in U.S. Treasury yields.

On the other hand, FPIs withdrew ₹1,602 crore from the debt market during the period under review.

Before this outflow, foreign investors injected ₹13,602 crore in March, ₹22,419 crore in February, ₹19,836 crore in January. This inflow was driven by the upcoming inclusion of Indian government bonds in the JP Morgan Index.

JP Morgan Chase & Co in September last year announced it will add Indian government bonds to its benchmark emerging market index from June 2024.

This landmark inclusion is anticipated to benefit India by attracting around $20-40 billion in the subsequent 18 to 24 months.

FPIs have turned sustained sellers and domestic institutional investors (DIIs) have turned sustained buyers in all trading days of this month, so far, with cumulative DII buying of ₹19,410 crore, V.K. Vijayakumar, chief investment strategist, Geojit Financial Services, said.

Overall, FPIs withdrew a net amount of ₹14,860 crore in equities in 2024 so far. They, however, invested ₹14,307 crore in debt market.