Questions On BJP’s Majority Win Lead To Depreciation Of 45 Paise In Indian Rupee Against US Dollar

The uncertainty surrounding a majority win for the BJP-led government triggered a major sell off in domestic equities, as panicked investors engaged in profit booking

The Indian rupee on Tuesday tanked 45 paise to settle at 83.59 (provisional) against the US dollar as the election trends indicated a difficult majority for the Bharatiya Janata Party in the Lok Sabha. 

Contradicting the exit poll predictions of a comfortable majority for PM Narendra Modi’s BJP-led NDA alliance, the election trends today showed a declining margin for the alliance. On the other hand, the INDIA alliance beat all expectations and maintained a lead on nearly 230 seats in the lower house.

This contradiction led to a rampage in the stock markets and key equity benchmark indices bled during the day. The uncertainty surrounding a majority win for the BJP-led government triggered a major sell off in domestic equities, as panicked investors engaged in profit booking.

As such, the S&P BSE Sensex tanked close to 4,400 points and settled at 72,079.05, while the NSE Nifty50 settled for the day 21,995.85, declining more than 1,250 points. Further, forex traders noted that a strong American currency also hindered any chance of improvement in the domestic unit. 

At the interbank foreign exchange market, the local currency opened at 83.25 and further traded between 83.23 and 83.59. Finally, the Indian rupee settled at 83.59 against the greenback, marking a depreciation of 45 paise from the previous close, reported PTI.

In the last trading session on Monday, the Indian unit closed at 83.14 against its American counterpart. 

The vote counting on Tuesday showed disappointing results for the NDA alliance in the Lok Sabha Elections 2024, as the trends indicated a heavy loss for the party in Uttar Pradesh, Rajasthan, and Haryana. However, the alliance remains favourite still to maintain a majority in the elections and form the government.

Anuj Choudhary, Research Analyst, Sharekhan by BNP Paribas, noted, "The rupee depreciated...today as domestic markets fell sharply amid uncertainty over election results outcome. This may have also led to some sell-off by foreign investors. The US dollar recovered from yesterday's losses on the weak Euro, which fell on disappointing employment data. The US dollar fell on Monday on weaker than expected ISM manufacturing PMI and construction spending."