Lok Sabha election results 2024: The election season began with hyperbole of over 400 seats, giving the markets an early boost to new highs. When guesstimates emerged in the markets, placing the NDA figure at about 320-330, the markets corrected. This was another strong result, but as the Street anticipated, the National Democratic Alliance (NDA) needed an overwhelming majority to push through structural changes to fulfill the aim of 'Viksit Bharat', or a Developed Nation, by 2047.
The exit polls on Saturday raised hopes that the NDA would win an overwhelming majority, with the lower end of the predictions putting the party at 350 or more seats. The markets saw a massive surge, with the Nifty reaching an all-time high of 23,338 on June 3, signaling a strong administration with a continuous focus on growth that would benefit industries such as infrastructure, railroads, and military. The rally was also supported by massive short covering, as the skeptics, particularly the FIIs, were forced to close their short holdings.
However, today's early election results trend discredited all exit poll data, and market participants appear to have gotten off on the wrong foot. There was substantial uncertainty over whether the NDA would be able to establish the government. There were suspicions that Prime Minister Narendra Modi will continue to lead even if the NDA formed the government.
Based on this, markets fell to a low of 21,281, representing a 9.30 percent drop intraday. However, when it became evident that the NDA would be able to form the government, the markets rebounded from their lows, but mood had already deteriorated.
Compared to the NDA's previous two mandates, this might be their weakest coalition. This means that the BJP may wind up focusing on its coalition partners rather than on economic progress.
We'll watch how Prime Minister Modi handles the new circumstance after having a free hand for the past two administrations. Will the government modify its stance on appeasement, weighing on the budgetary position, which is now under control, particularly after the recent RBI dividend?
The investing community would have many unanswered questions, which would discourage them from investing again for a time as they continued to face massive losses in their portfolios.
Normalcy should resume in the next weeks or months as the skies dissipate. For the time being, I feel we have reached a peak, and the markets may drift in the future. The only near-term upside might be during government formation, with a possible increase in the run-up to the Budget. Long-term investors, on the other hand, may see a chance to buy in the coming months
