Investing.com – India’s stocks and indices opened choppy on Wednesday after the 2024 general election results showed the ruling BJP-led alliance winning a much smaller majority than initially expected.
Both indexes fell nearly 6% each on Tuesday after initial results showed the opposition Indian National Congress and its allies winning significantly more seats in India’s lower house than expected, while the BJP lost ground.
By 10:10 am IST (0440 GMT), the Nifty was trading 0.7% higher after falling as much as 2% at the open. Sensex fell a little.
The Nifty and Sensex soared to record highs on Monday after exit polls over the weekend showed a landslide victory for the BJP. But they were stunned by profit-taking and repositioning in industrial stocks after Tuesday’s results.
While Prime Minister Narendra Modi is still expected to win a rare third term, the smaller majority portends greater difficulty in implementing economic reforms.
That led to a sharp sell-off in industrial and manufacturing stocks that were poised to benefit from a third, strong term for Modi, whose policies during his last decade in office relied heavily on infrastructure spending and support for Indian manufacturing.
Conglomerate Adani Enterprises Ltd (NS:), whose shares are heavily linked to the ruling party, fell 4% on Wednesday, extending its loss to nearly 20% from the previous session. Shares of its subsidiary Adani Ports and Special Economic Zone Ltd (NS:) also lost nearly 4% after a similar decline on Tuesday.
Larsen and Toubro Ltd (NS:), which benefited from increased infrastructure spending in the country, fell 6% after losing nearly 13% in the previous session.
But losses in other heavyweights, such as Reliance Industries Ltd (NS:) now appears to be moving lower after falling sharply on Tuesday.
“There are two immediate political risks that need to be monitored: 1) defection of NDA coalition partners to break away from the BJP and 2) challenges within the NDA to Modi’s position as government leader. Either outcome would be unfavorable from a financial markets perspective,” ANZ analysts wrote in a note.
But they maintained their economic forecasts for the Indian economy, forecasting an overestimated gross domestic product of 6.8% for the current fiscal year.