India shares plunge as polls show Modi's mandate slipping

MUMBAI/SINGAPORE — Indian stocks tanked the most in four years on Tuesday (June 4), as vote counting suggested Prime Minister Narendra Modi's Bharatiya Janata Party (BJP)-led alliance is unlikely to win an overwhelming majority as predicted by exit polls.

Modi's bloc looked set to secure a majority in early vote counting in the general election on Tuesday, but the numbers were well short of the landslide predicted in exit polls.

The Nifty index dropped as much as 5.43 per cent to 22,000.60 points while the BSE index fell to a low of 72,337.34 points, down 5.4 per cent on the day. That was the biggest fall since April 2020 and pulled stocks sharply away from records highs struck a day earlier.

"Markets have dropped as they are now pricing in the change in governance structure," said Umesh Kumar Mehta, chief investment officer at Samco Mutual Fund.

Mehta said if the National Democratic Alliance (NDA) is forced to seek support from smaller parties to form government, it may not be able to function as efficiently as it has over the last 10 years.

"If there is a fractured mandate, we think markets should be more nervous. But so long as the current leadership and the prime minister stays, the drop will not be massive," he added.

The intraday volatility on the share index rose to its highest level in 26 months.

Exit polls over the weekend had projected a big win for Modi's NDA, catapulting markets to all-time highs on Monday as investors were buoyed by expectations of sustained economic growth.

Benchmark indexes have more than tripled in value since Modi became prime minister in May 2014, as of Monday's close.

However, on Tuesday, shares of government-owned banks, infrastructure and capital goods firms that gained sharply on