Stock Market Panic: Investors loose Rs 26 lakh crore in just two hours as election race gets tighter than what exit polls predicted

As the vote counting trends started pouring in, the stock markets began to loose steam that was built up due to exit poll predictions. However at 12.25 pm, it is still early to arrive at any conclusions.

A sharp selloff in the Indian stock market on Tuesday, June 4, led to a significant loss for investors, wiping out approximately ₹26 lakh crore in intraday trade. The overall market capitalisation (mcap) of companies listed on the BSE plummeted to nearly ₹400 lakh crore around 11:05 am, compared to nearly ₹426 lakh crore at the previous session’s close. This drastic decline occurred after early election trends indicated a tighter result than exit polls had predicted.

The benchmarks, Sensex and Nifty 50, both dropped by 5% each, while the BSE Midcap index and the BSE Smallcap index also suffered losses of over 5% intraday on Tuesday. Experts noted that the Indian stock market had already priced in a significant majority for the NDA, based on exit poll predictions. However, the early trends showed results that did not meet these expectations, causing panic among investors.

Avinash Gorakshkar, Head of Research at Profitmart Securities, commented, “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.”

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, added, “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.”

Andrew Holland, CEO of Avendus Capital Public Markets Alternate Strategies, pointed out that market confidence following the exit poll was also based on the historically accurate forecasts of these polls over the past two decades, except in 2004 for the Lok Sabha elections. “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 reacted prematurely, with only two rounds of counting completed. Due to physical counting under VVPAT, the process is slower this time. “Most channels are impulsive in reporting numbers and setting narratives 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.

At around 10:10 am, the Nifty 50 was down by 4.67% at 22,177, while the Sensex had dropped by 4.96% to 72,674. The overall mcap of BSE-listed firms stood at nearly ₹400 lakh crore at that time. In the previous session, the Sensex and Nifty 50 had posted robust gains in anticipation of a solid majority for the NDA.

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