Monday’s record readings in India’s Nifty 50 index quickly disappeared as Tuesday’s election results were tougher than expected. Current Prime Minister Narendra Modi and his Bharatiya Janata Party are losing their majority in parliament, forcing Modi to work with smaller parties. In the preliminary polls held over the weekend, the BJP was projected to win between 353 and 401 of the 543 seats in parliament, but on Tuesday afternoon it seemed that the party would only have around 240 seats. This surprising result made investors cautious, and India’s Nifty 50 index closed down six percent.
The market was shocked by the election outcome, with speculation arising about how much leeway Modi will have if the BJP does not secure a majority. India has been one of the fastest growing economies in the world post-coronavirus pandemic, with Modi aiming to make it the third-largest economy after the US and China. Foreign investments have flowed into India during this period of growth, often at the expense of China, leading many investment experts to hold India in high regard.
The election results had a significant impact on large companies listed on the Indian stock exchange, with Adani Ports and Adani Enterprises experiencing over 20 percent drops in their stock prices. Financial institutions like Bank of India and ICICI Bank also saw their shares fall by 17 and 9 percent, respectively. The uncertainty surrounding the election outcome has made the market jittery about the future of one of the world’s fastest growing economies.