A steep selloff in the Indian stock market on Tuesday, June 4, led to a massive loss for investors, wiping out approximately Rs 20 lakh crore within the first 20 minutes of trading. By 9:35 am, the market capitalisation (mcap) of BSE-listed companies had plummeted to nearly ₹406 lakh crore from the previous session’s close of nearly Rs 426 lakh crore.
Market reaction to election trends
The Indian stock market experienced a sharp decline after early election trends suggested a closer race than exit polls had anticipated. The Sensex and Nifty 50 both dropped over 4%, while the BSE Midcap and Smallcap indices each fell over 5% intraday.
Expert analysis
Market experts highlighted that the stock market had already priced in a significant majority for the NDA, based on exit poll predictions. However, the unexpected tightness in early election results 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. 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.
Partial recovery
Despite the initial plunge, the stock market pared some losses as the day progressed. By 10:05 am, the Nifty 50 was down 2.07% at 22,782, and the Sensex was down 2.16% at 74,819. The overall mcap of BSE-listed firms stood at nearly ₹416 lakh crore at that time.
In the previous session, both the Sensex and Nifty 50 had seen robust gains in anticipation of a solid majority for the NDA.
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