Investing.com-- India’s Nifty 50 and BSE Sensex 30 indexes saw a choppy open on Wednesday, after the results of the 2024 general election showed that the ruling BJP-led alliance secured a much smaller majority than initially expected.
Both indexes had plummeted nearly 6% each on Tuesday after the initial results showed the opposing Indian National Congress and its allies won substantially more seats in India’s lower house than expected, while the BJP lost ground.
By 10:10 AM IST (04:40 GMT), the Nifty was trading up 0.7% after falling as much as 2% at the open. The Sensex fell slightly.
The Nifty and the Sensex had rocketed to record highs on Monday after exit polls over the weekend showed a sweeping victory for the BJP. But they were slammed by profit-taking and repositioning out of industrial stocks after Tuesday’s results.
While Prime Minister Narendra Modi is still expected to secure a rare third term, a smaller majority heralds more difficulty in enacting economic reforms.
This saw steep selling in industrial and manufacturing stocks, which were set to benefit from a third, strong term for Modi, whose policies over the past decade of rule have leaned heavily into infrastructure spending and bolstering Indian manufacturing.
Conglomerate Adani Enterprises Ltd (NS:ADEL), which has been largely tied to the ruling party, slid 4% on Wednesday, extending a nearly 20% loss from the prior session. Its sister firm Adani Ports and Special Economic Zone Ltd (NS:APSE) also lost nearly 4% after a similar decline on Tuesday.
Larsen & Toubro Ltd (NS:LART), which has benefited from increased infrastructure spending in the country, slid 6% after a nearly 13% loss in the prior session.
But losses in other heavyweights, such as Reliance Industries Ltd (NS:RELI), now appeared to be tapering off after steep declines on Tuesday.
“There are two immediate political risks to be monitored: 1) defection of NDA coalition partners to break away from BJP, and 2)challenges from within the NDA to Modi’s position as the leader of the government. Either of these outcomes would be unfavourable from the viewpoint of financial markets,” ANZ analysts wrote in a note.
But they maintained their economic forecasts for the Indian economy, forecasting an outsized gross domestic product of 6.8% for the current fiscal year.