Kolkata:The election results day has been a worrisome day for Indian investors. The market witnessed a steep fall tracking the election results, which signalled a better-than-expected performance for the INDIA bloc and NDA’s seat tally much below the exit poll results that had predicted 350 to 401 seats for the alliance. Apart from this, profit booking at higher levels also triggered selling on Dalal Street today.
Sensex 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. It was the biggest percentage-term single-day fall for the Nifty 50 in over four years since March 2020. The index had seen massive losses in early 2020 when the COVID-19 pandemic hit the world.
Mayhem was seen in the form of panic selling across the board in the morning trade itself. In the mid-session, some recovery was seen, but did not last for long as another round of selling in the last session dragged the Index lower to end the session with a massive cut of 1,379.40 points at 21,884.50. Barring FMCG, all the sectors ended the session with a sharp decline with PSU banks and energy being the major underperformers.
Disappointed with early counting trends that showed Dalal Street’s favourite Prime Minister Narendra Modi-led NDA alliance may win elections, but with a lower-than-expected seat count, Sensex in the early hours fell over 6,100 points to record the biggest intraday fall in the last four years.
Sensex and Nifty not only erased all of the gains recorded in Monday's session as exit poll euphoria that predicted 350+ seats for NDA looked far-fetched. On Monday, NSE Nifty 50 gained 733.20 points or 3.25% to settle at 23,263.90, while the BSE Sensex jumped 2507.47 points or 3.39% to 76,468.78.
Experts speak on today’s market movement
Commenting on the market performance Vinod Nair, Head of Research, Geojit Financial Services, said, "The unexpected outcome of the general election sparked a wave of fear selling in the domestic market, reversing the recent substantial rally. Despite this, the market maintains its expectation of stability within the coalition led by BJP as the major election winner, thereby mitigating substantial downside in the medium-term.”
Market commentators feel that the outcome of election results will likely lead to a major shift in political policy with a focus on social economics, which will positively affect the rural economy.
“Alongside, the sectors that have topped in the past five years, including power, capital goods, real estate and industrials, are advised to exercise caution in the near term. Nevertheless, the long-term growth prospects for these sectors remain robust,” Nair said.
The real pain was seen in the broader markets as mid and small-caps corrected over 7.8% to underperform the Frontline Index. On the daily chart, the Index has formed a massive red candle, which suggests extreme pessimism in the markets and the impact of counting is likely to persist tomorrow as well. The immediate support is located at 21,600 while a level of 22,500 will be a strong hurdle.
BHEL, Hind Copper, BEL, Nalco, CONCOR have been the biggest PSU losers. PSU stocks have fallen by 25 per cent with power financiers being the biggest losers. Consumption-related stocks have witnessed healthy gains with Dabur, Colgate being top gainers. The Bank Nifty index opened on a negative note and remained under pressure throughout, finally settling the day on a negative note at 46,928.60. Technically, the Bank Nifty has sustained below a low of hanging man candlestick pattern, leading to weakness.
Nagaraj Shetti, Senior Technical Research Analyst, HDFC Securities said “Nifty witnessed heavy bloodbath on Tuesday on the back of counting of votes of general election 2024 and closed the day sharply lower by 1379 points. After opening with a negative note, the market reacted sharply on the downside as the counting of votes progressed. A minor upside recovery attempt was seen in between, but the market failed to sustain the intraday bounce. Finally, Nifty closed the day by erasing some of the intraday loss towards the end.” Cash market volumes on the NSE rose to a record high of Rs.2.71 lakh crore.
The short-term trend of Nifty is highly volatile with negative bias. Immediate support is placed for Nifty around 21250 levels. “Once election result volatility settles down, the market could find direction for the near term. There is a possibility of an upside bounce in the Nifty from near 21250-21000 levels,” Shetti said.
Internationally, Asian shares retreated Tuesday, on signs of weakness in the US economy, even as the data boosted hopes for an interest rate cut, while Indian markets dived as it appeared India's prime minister would not win as big an election victory as expected. European stocks slipped, led by a fall in energy stocks (due to crude oil price weakness) while investors refrained from placing huge bets before the European Central Bank's interest rate decision later this week.
What should investors do?
VK Vikaykumar of Geojit Financial said that investors should remain invested in large caps and do some profit booking in small caps. A significant trend on June 3 was that the largecaps outperformed the smallcaps. This is primarily the consequence of FIIs turning buyers. If the FIIs continue to buy, this large outperformance will continue. RIL, L&T, HDFC, ICICI and M&M are on strong wickets.
Christy Mathai, Fund Manager- Equity at Quantum AMC said that some of the investment/capex-led themes, which have done well baking in strong government capex spending may be at risk if the government priorities are different. But over the longer term election outcomes don’t have a bearing on India's longer-term outlook, which has been at 6.5% real GDP growth, across governments.
“We have witnessed policy continuity across various governments, which has resulted in continued economic momentum and eventually resulted in equity returns. We don’t expect any major change from this trend going forward also. That said at the current juncture, most of the sectors baring private sector banks are trading at relatively elevated valuations and in that context, investors may consider staggered investments into equity at this point,” said Mathai.
Read more:Market Plunges Over 8% As BJP's Election Performance Disappoints
