Representative image showing stock market crash.
Credit: iStock Photo
New Delhi: The Indian equities markets benchmark indices – Sensex and Nifty – slumped by around 6% on Tuesday, the biggest fall in over four years, wiping off around Rs 32 lakh crore ($386 billion) worth of investors’ wealth, as Prime Minister Narendra Modi-led alliance fell short of the predicted decisive victory.
Stocks of public sector companies, especially banks, defence and infrastructure-related firms; as well as Ambani and Adani group stocks were among the worst hit. Several stocks crashed by upto 25% in the intra-day. More than 800 stocks hit their respective lower circuits by noon as Lok Sabha election results indicated that the ruling BJP would not reach the majority mark on its own.
After hitting a record high on Monday, benchmark Sensex of the BSE started the day with marginal loss. The index nosedived by noon as the trends of election results emerged. The Sensex crashed by 6,234 points in the intra-day. It recovered some of the lost ground in the afternoon and ended the session 5.74% or 4,389.73 points down, the worst fall since March 2020.
Nifty 50 of the NSE closed 5.93% or 1,379.40 points down at 21,884.50 points. The index slipped to a low of 21,281.45 points in the intra-day.
“The unexpected outcome of the general election sparked a wave of fear selling in the domestic market, reversing the recent substantial rally,” said Vinod Nair, head of research at Geojit Financial Services.
Rupak De, senior technical analyst at LKP Securities said the market had priced in a landslide victory for Modi-led National Democratic Alliance (NDA). Against the exit polls prediction of close to 400 seats the NDA failed to cross even the 300-mark.
All 10 listed firms of Adani group crashed, erasing over Rs 3 lakh crore in the market value of the group companies. Adani Ports and Special Economic Zone tumbled 21.26%; Adani Enterprises crashed 19.35%; Adani Power dipped 17.27% and Adani Total Gas slumped 18.88%.
Mukesh Ambani-led Reliance Industries Limited tumbled 7.53%. It was the biggest drag on the benchmark Sensex.
There was heavy selling in PSU stocks. State Bank of India (SBI) closed 14.42% down after crashing by around 20% in the intra-day. Bharat Heavy Electricals dipped 20.94%; Bharat Electronics tumbled 19.80 and Power Finance Corporation crashed 23%.
These PSU companies along with the firms led by billionaires Gautam Adani and Mukesh Ambani are seen as among the biggest beneficiaries of policies and initiatives taken by Prime Minister Modi government.
“Most of the sensitive spaces like banking, PSUs and Adani group stocks plunged like there is no tomorrow,” said Sameet Chavan, Head Research – Technical & Derivative, Angel One.
“Some of the stocks corrected more than 15-20% today only, but one should not consider this as a buying opportunity immediately . We may see disappointment aggravating further due to its vertical rise in recent months; therefore, further liquidation is evident,” Chavan added.
Some analysts expressed hope that the volatility will be short-lived and the market is likely to bounce back.
“Historical data suggests that despite initial volatility, markets tend to recover and even thrive in the longer term. For instance, even after the 2014 and 2019 elections, the Indian stock market saw significant gains in the months following the election results,” said Pradeep Gupta, Co-founder & Vice-chairman of Anand Rathi Group.
“Once this turbulence stabilises, attention will shift to the core macro factors affecting India. Investors should brace for volatility in the short-term, but the underlying fundamentals of India’s growth story remain strong,” said
Amisha Vora, Chairperson & MD, Prabhudas Lilladher, said the market attention would now shift to core macro factors affecting India.” Investors should brace for volatility in the short-term, but the underlying fundamentals of India’s growth story remain strong,” Vora added.
“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,” said Nair.
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