Markets tank 5% as vote count indicates no clear majority for BJP, defensive stocks gain

Equity markets plunged on Tuesday, registering their biggest fall since March 2020 after the BJP-led National Democratic Alliance (NDA) government failed to replicate the landslide win predicted by the exit polls. The benchmark Nifty 50 and the Sensex fell as much as 8% on Tuesday afternoon before paring some of their losses.

The Nifty 50 closed 5.45% lower at 21,995.85 on Tuesday, dragged by heavy losses in Adani Ports, Adani Enterprises, and ONGC. On the other hand, Hindustan Unilever, Britannia and Nestle India recorded gains as investors shifted their funds to defensive stocks.

The Sensex closed the session 5.74% lower at 72,079.05 dragged by NTPC, SBI and Larsen & Toubro. Meanwhile, Nifty PSU Bank was the biggest loser among NSE indices having closed over 15% lower. Union Bank shares lost over 17% while Bank of Baroda fell over 15% on Tuesday. The Nifty Oil & Gas and the Nifty Metal indices also recorded significant losses on Tuesday.

Meanwhile, the Bank Nifty closed the day 7.95% lower at 46,928.60. Bank of Baroda, Punjab National Bank, and SBI fell over 13%.

The SBI stock hit an intra-day low of ₹731.95 on Tuesday on the National Stock Exchange of India (NSE), down 19.2% compared with its previous close of ₹905.65 apiece. This the most significant single day fall in SBI's history till date.

On the other hand IT stocks posted a sharp recovery towards closing session of the market. TCS, HCL TECH shares closed

The broader market didn’t fare well with all indices trading in the red. Midcap and smallcap stocks saw significant selling pressure with the Nifty Midcap 100 and the Nifty Smallcap 100 closing nearly 8% lower.

Reasons for the fall

The markets faced massive selling pressure on Tuesday as the counting of votes for the Lok Sabha elections progressed. Contrary to what the exit polls predicted, the trends of the results did not indicate a clear majority for the BJP. This shook up the confidence of investors as heavy selling pressure was seen.

Investors also booked profits across sectors shifting their money to defensive stocks. Stocks like Adani Ports and Adani Enterprises, which command significant weights in the index, fell over 16%.

Asian markets also sent a mixed signal. The Nikkei was down 0.22% while the Hang Seng closed 0.22% up. The Kospi declined 0.76%.