Following indications from the country’s general election that Prime Minister Narendra Modi’s party might not be able to create a majority government, Indian stocks experienced a steep decline.
Since India’s initial Covid lockdowns in March 2020, the benchmark NSE Nifty 50 share market has fallen by about 6%. This is the index’s worst decline to date.
According to preliminary findings, Mr. Modi’s party could have to establish a coalition government by depending on partners.
Certainty over economic policy could result from such, according to some observers.
The NSE Nifty 50, which is made up of equities in a number of large corporations, fell 8.5% at one point and finished the day at 21,884.5 points, down 5.9%.
Along with a steep decline, the S&P BSE Sensex closed 5.7% lower at 72,079.05.
The rupee saw its largest decline in 16 months when it fell 0.5% versus the US dollar.
In India’s general election, more than half of the votes have been counted, and it appears unlikely that Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) will win a majority in the lower house of parliament, which has 543 members.
In order to establish the next government, it might need to rely on friends in the National Democratic Alliance (NDA).
According to analysts, this might cause some uncertainty over economic measures, such the push for investment that has been a pillar of the Modi government’s authority.
According to Ken Peng, head of investment strategy, Asia, at Citi Global Wealth, “the key question is whether BJP can retain single-party majority,” as reported by Reuters.
“If not, then would its coalition be able to deliver economic development, particularly infrastructure?”
Puneet Sharma, the CEO and fund manager of Whitespace Alpha, stated to Reuters that the new administration “may shift its focus” to prioritize welfare over reforms in the July budget if it depends on coalition partners.
In 2014 and 2019, the Hindu nationalist BJP secured majorities.
After exit polls over the weekend indicated that Mr. Modi and the BJP would win handily, markets surged on Monday.
However, it appears that the BJP will not be able to accomplish a majority on its own.
