Indian financial markets experienced a significant sell-off as early vote counting trends indicated that Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP)-led alliance might not secure the overwhelming majority predicted by exit polls over the weekend. This unexpected development has caused nervousness among investors, leading to a wave of profit booking.
Over the weekend, exit polls projected a substantial victory for Modi’s National Democratic Alliance (NDA), which had led to markets reaching all-time highs on Monday. The surge was driven by investor optimism regarding continued economic growth under Modi's leadership. However, the early vote counting trends on Tuesday prompted a swift market correction as traders sought more clarity on the final seat tally for the NDA.
The Nifty index saw a steep decline, dropping by as much as 3.76 percent to 22,389.85 points, while the BSE index fell to a low of 73,659.29 points, a decrease of 3.67 percent. Both indexes had hit lifetime highs just a day earlier. By 04:25 GMT, the markets had partially recovered, with both trading down about 2 percent each.
Despite the recent volatility, the benchmark indexes had experienced significant growth since Modi assumed office in May 2014, with their values more than tripling. The rupee also felt the impact, dropping to a low of 83.4375 against the dollar compared to its previous close of 83.1425. Meanwhile, the benchmark 10-year bond yield rose by 8 basis points to 7.02 percent in early trade.
The market's response underscores the high stakes of the election results for investors, who are closely monitoring the situation for signs of political stability and economic continuity under the NDA government.
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