As the Lok Sabha Election 2024 outcome trends inclined towards a smaller win for the ruling government on Tuesday afternoon, the stock markets started feeling the tremors of uncertainty. 


Going against the exit poll predictions of a comfortable third term for PM Narendra Modi in office, the Lok Sabha Elections 2024 results indicated a decreasing margin for the Bharatiya Janata Party (BJP)-led NDA alliance. Around 12:15 PM, the results showed the NDA leading on around 270 seats, while the INDIA alliance beat all poll expectations and retained its lead on nearly 250 seats.


This caused panic amongst investors in the stock markets as both key equity benchmark indices traded in a free fall. As of 12:16 PM, the S&P BSE Sensex tanked more than 5,000 points and 6.60 per cent to trade at 71,419.46, while the NSE Nifty50 plunged over 1,600 points and almost 7 per cent to touch 21,653.80 in the session.


As the markets progressed, around 12:38 PM, the indices tanked further, representing the doomed atmosphere of the markets. The Sensex took a free fall of 5,468.92 points to touch 70,999.86 in the session, while the Nifty fell more than 1,750 points to trade at 21,499.35.


Explaining the market sentiment, Kranthi Bathini, Director - Equity Strategy , WealthMills Securities Pvt Ltd, said, “As the NDA-led government is trailing below 300, the market sentiment has become negative. The markets have fallen drastically. This is the key reason of the carnage in the market. And this is why we can witness broad based profit booking and panic selling in the market.


Bathini stressed that the failure of BJP to make the government could weigh heavily on the market. “If the BJP is not forming government on its own, that will have a sentimental impact in the medium to short term in the market," he added.


Atul Parakh, CEO, Bigul, further noted, "Today's drastic decline in both the Sensex and Nifty indices, with the Sensex plummeting over 5000 points and the Nifty down by 1600 points, has sent shockwaves through the market. Investors are grappling with heightened uncertainty and apprehension, driven by concerns over the possibility of no majority for the BJP in the upcoming elections. Such a sharp downturn in a single day underscores the severity of investor reactions to political developments and their perceived impact on market stability and economic policies."


Parakh, however, stated that this isn't the largest drop seen by the Sensex in a single trading day. "The most significant downturn occurred on May 17, 2004, with the BSE witnessing a 15.52% fall. However, the magnitude of today's decline is significant and warrants attention from market participants and analysts alike," he stressed.


In terms of how the investors should approach the market, the expert suggested, "Investors may consider reassessing their portfolios, adopting a cautious approach, and closely monitoring further developments to navigate through this period of heightened volatility and uncertainty."


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