A sharp selloff in the Indian stock market resulted in a significant loss for investors, reducing their wealth by approximately ₹31 lakh crore on Tuesday, June 4. The overall market capitalisation (mcap) of companies listed on the BSE plummeted to nearly ₹395 lakh crore on Tuesday against nearly ₹426 lakh crore at the previous session's close.
The Indian stock market witnessed an overall sharp selloff after early trends showed that the election result could be tighter than exit polls had predicted.
Benchmarks the Sensex finally closed with a massive loss of 4,390 points, or 5.74 per cent, at 72,079.05, while the Nifty 50 ended with a cut of 1,379 points, or 5.93 per cent, at 21,884.50.
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Experts pointed out that the Indian stock market had already factored in a significant majority for the NDA, as exit polls had predicted. However, early trends showed that the results may not align with market expectations, which seems to have spooked investors.
"This sharp fall in the Indian stock market is mainly due to the disappointing early trends in the Lok Sabha Election results. This trend is not in sync with the exit poll. This has put some panic in the market," said Avinash Gorakshkar, Head of Research at Profitmart Securities.
“The steep fall is due to the results so far falling short of the exit polls, which the market discounted yesterday. If BJP doesn’t get a majority on its own, there will be disappointment, as reflected in the market,” said Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
"Also, it is possible that Modi 3.0 may not be as reform-oriented as the market expected and may turn more welfare-oriented. This is getting reflected in the strength of FMCG stocks," said Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Andrew Holland, CEO of Avendus Capital Public Markets Alternate Strategies, said that the market confidence after the exit poll was also premised on these polls having been more or less accurate forecasters in the past two decades, save in 2004, for the Lok Sabha polls.
"This confidence had been shaken in the first half of Tuesday. We will wait and see what happens in the second half," Holland said.
Deven Choksey of DRChoksey Finserv, observed that the market is reacting early, with just two rounds of counting done, while due to physical counting under VVPAT, the process is slower this time.
"Most channels are impulsive in reporting numbers and setting the narratives but without considering the number of rounds for which the counting took place. I feel the market will once again get steady, and the same high beta stocks will be bought," said Choksey.
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