India shares plunge on concerns of a narrower win for India’s Modi

At day’s low, indexes saw biggest intraday fall since March 2020, when stocks were battered by first COVID-19 lockdown.

Indian stocks have suffered their worst intraday fall since March 2020 and foreign investors sold the most on record, as vote-counting trends in the general election suggested Prime Minister Narendra Modi’s alliance was unlikely to win the overwhelming majority predicted by exit polls.

With over half the votes counted on Tuesday, Modi’s Bharatiya Janata Party (BJP) looked unlikely to secure a majority on its own in the 543-member lower house of parliament and likely to need allies in the National Democratic Alliance (NDA) to form the government.

That could lead to some uncertainty over economic policies, such as the push for investment-led growth, which has been the cornerstone of the Modi government’s rule. The Indian economy grew 8.2 percent in the financial year ended March 2024.

“The key question is whether BJP can retain a single-party majority,” said Ken Peng, head of investment strategy for Asia at Citi Global Wealth. “If not, then would its coalition be able to deliver economic development, particularly infrastructure?”

The NSE Nifty 50 index closed down 5.93 percent at 21,884.5 points, and the S&P BSE Sensex fell 5.74 percent to 72,079.05. The indexes fell as much as 8.5 percent earlier in the day, after hitting record highs on Monday.

At the day’s low, the indexes saw their biggest intraday fall since March 2020, when stocks were battered by the first lockdown during the COVID-19 pandemic.

“Due to the dependency on coalition partners, the upcoming NDA government may shift its focus towards a welfare-oriented approach rather than concentrating on reforms during the July budget,” said Puneet