Indian stock markets sharply declined on Thursday as Sensex and Nifty crashed more than 3% each to record the worst-single day fall since the infamous June 2024 market crash, when the benchmark indices tumbled 6% each following the outcome of Lok Sabha elections.

Sensex on Thursday plunged nearly 2,500 points to settle at 74,207, and Nifty 50 tumbled 776 points to close at 23,002, after briefly breaching the key psychological level of 23,000 during the session. The selloff wiped out over Rs 11.5 lakh crore in market capitalisation of BSE-listed firms, bringing the total down to a little over Rs 427 lakh crore. Soaring crude prices and hawkish Fed commentary were among the key triggers behind the decline.

The infamous 2024 election day crash

Today’s sharp decline reminded investors of the massive stock market crash of June 2024. After the voting for 2024 General Elections, exit polls predicted a landslide victory for the National Democratic Alliance (NDA), led by Prime Minister Narendra Modi-led BJP. They predicted that BJP would win more than 272 seats in the 543 member Parliament, while NDA would cumulatively win up to 370 seats. This had pushed markets sharply higher on Monday (June 3, 2024), a day before the mayhem.As the session began on Tuesday (June 4, 2024), investors quickly panicked as the early trends of the actual election results were far away from the fairytale landslide victory expected. BJP failed to reach the halfway mark on its own, and the NDA won 293 seats to form the government, although with lesser seats than what was expected.

Sensex and Nifty crashed nearly 6% each on June 4, 2024, wiping off a significant portion of investors’ wealth. Sensex settled at 72,079, and Nifty 50 closed at 21,884.

While the NDA did indeed win the elections and form the government, the investor sentiment was severely hurt. What followed was a series of political debates and mudslinging. Congress-led opposition coalition, called I.N.D.I.A, accused the PM Modi-led government of stock market scam, as the leaders of BJP had strongly suggested that investors buy Indian shares ahead of the results, expecting a massive victory in the elections.

Markets however moved on, while one day of massive losses seemed to be the end of the world, they only became a short-term trend in hindsight that long-term investors soon recovered. Sensex then went on to rally 19% (around 12,000 points) to cross 86,000 in less than two years.

While today’s market crash seems massive, history shows the resilience of Indian stock markets.

All 30 constituents of the BSE Sensex closed in the red on Thursday, with Eternal and HDFC Bank falling more than 5% to lead losses. Bajaj Finance, Mahindra & Mahindra, and Larsen & Toubro followed, declining 4-5%.

“Indian benchmark equity indices plunged over 3% on March 19th, snapping a three-day rally, weighed down by a sharp rise in crude oil prices and weak global cues. Additionally, the US Federal Reserve kept its benchmark rate unchanged while signalling higher inflation, leaving limited room for rate cuts this year. Brent crude has surged to around USD 114, posing a negative for oil-importing countries like India,” said Bajaj Broking.

“Going ahead, markets appear to be in a phase of heightened fragility, where sentiment is being driven by rapidly evolving geopolitical developments and sharp rise in crude prices. Given the intensifying tensions around energy infrastructure in West Asia, we remain cautious on the market in the near term and expect volatility to persist,” said Siddhartha Khemka, Head of Research, Wealth Management, Motilal Oswal Financial Services.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

It was an action-packed market week as investors experienced a roller coaster ride with highs of a rally after the exit poll, a meltdown on the election results day followed by a complete recovery.

The recovery from the results day meant that most of the sectors recouped losses which was reflected in 85 smallcap stocks delivering double-digit weekly returns. About 5 stocks rode the recovery wave and rallied over 25% during the week with the highest return going as high as 64% from Heritage Foods.

Heritage Foods is a TDP-related company and has seen a surge following a strong show by the regional party in both the assembly and Lok Sabha elections. Modi-led BJP not crossing the majority mark meant that Chandrababu Naidu’s TDP emerged as the kingmaker and one of the crucial components of NDA.

Other top gainers in the smallcap pack include Moschip Technologies(44.9%), PTC Industries (30.3%), Authum Investment(27.9%), V-Mart Retail (26.5%), BL Kashyap and Sons (24.5%) among others.

About 8 stocks including Universal Cables, Avanti Feeds, Marathon Nextgen Pokarna, IFB Industries, Ganesh Housing and others have delivered returns between 20-25% in the smallcap pack during the week.In the midcap segment, nine stocks including Emami, Bayer CorpScience, UnoMinda among others have risen in double digits. While Emami gained 15.6%, Bayer Crop and Uno Minda were up over 13% each.

What should investors do?

In the upcoming week, the outlook for the market will be guided by the major domestic and global economic data including India WPI Inflation, China CPI Inflation, UK GDP data, US CPI data, and the Fed’s interest rate decision. All eyes will also be on the key portfolio allocation in the NDA government and initial policy agenda.

Analysts said the market will continue to be volatile with an upward biasedness.

“Strong domestic economic data, falling oil prices, and NDA unanimously passing a resolution to elect Narendra Modi as the leader of the coalition has uplifted investor confidence. Next week’s focus will be on allocation of key cabinet portfolios such as Finance, Defense, Roads, Energy, Commerce, and Railways,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services.

Technically, following the emergence of a bullish candlestick pattern on the daily timeframe, the Nifty index has maintained its upward trajectory.

“As we assess the near-term outlook, it appears probable that the index will continue to adhere to this range-bound behaviour, with movements expected to hover within the boundaries of 22,600 to 23,400.22800-23000 will act as short-term support, while, 23400-23500 will act as the hurdle for further upside,” said Arvinder Singh Nanda, Senior Vice President, of Master Capital.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

As India waits for the mega election verdict on June 4, exit polls already have a resounding majority for the Modi government, bringing much-needed cheer to market participants.

NDA is forecasted to win 370 seats, according to the average of all exit polls and the markets are likely to react positively to pollsters’ predictions.

Motilal Oswal said the victory of PM Modi and the BJP augurs well for the economy and capital markets as it provides stability and continuity in policymaking with a single-party majority government, which will be expected to continue pushing its economic agenda.

Equity markets displayed some anxiety and nervousness recently around the impending political uncertainty, which resulted in a sharp rise in volatility in April and May 2024.

With this clear verdict, markets will heave a sigh of relief, according to brokerage, and go back to fundamentals and business-as-usual mode.Against this backdrop, Motilal’s model portfolio remains aligned with the key domestic cyclical themes amid a consistent backdrop of earnings growth.The brokerage remains overweight on financials, consumption, industrials, and real estate, industrials, consumer discretionary, real estate, and PSU banks.Among top ideas, Motilal Oswal likes ICICI Bank, SBI, L&T, Coal India, M&M, Adani Ports, ABB, HPCL, and Hindalco in the largecap pack, while Indian Hotels, Godrej Properties, Global Health, KEI Industries, PNB Housing, Cello World, and Kirloskar Oil are preferred in the midcap segment.

“Fundamentally, India is witnessing its own mini-Goldilocks moment with excellent macros, solid corporate earnings (Nifty ended FY24 with 25% earnings growth and FY25/26 earnings are likely to post 14-15% CAGR), focus on manufacturing, capex and infrastructure creation, and valuations at 20x one-year forward earnings,” Motilal Oswal said.

In this context, the brokerage believes the election verdict if proven true, and the consequent political stability and continuity in policy-making will act like an icing on the cake and keep India as the cynosure of all eyes.

As the exit polls are flashing a clear advantage to the Bharatiya Janata Party (BJP) led NDA faction, top voices on Dalal Street see a continuation of reform policies in Prime Minister Narendra Modi’s third term. They expect the government’s focus on infrastructure, defence, railways and other sectors to continue.

According to the poll-of-polls, the National Democratic Alliance (NDA) is projected to secure over 350 seats out of the 542 contested, spanning seven phases over 48 days.

While exit polls are estimates, the counting of votes will take place on June 4, Tuesday.

Here’s what experts said:

CLSA
Even as the exit polls give BJP a poll position, the final outcome is yet to come. Hong Kong brokerage CLSA said that a favourable outcome would raise investor confidence in India’s economic growth. This could encourage investors to play this growth beyond Modi stocks, which are direct policy plays.It has gone ahead to identify 54 stocks in the 183 stocks strong F&O basket arguing that these will be part of the India growth story. These stocks have been perceived as direct beneficiaries of PM Modi’s policies and half of these are PSUs. CLSA’s analysis reveals 90% of Modi stocks have beaten the Nifty in the election-focused rally over the past six months versus only 42% of the other companies outperforming. L&T, NTPC, NHPC, PFC, ONGC, IGL, MAHGL, Bharti Airtel, Indus Towers and Reliance are the preferred Modi stocks for CLSA analysts.Nomura
While it is apparent now that BJP/NDA has indeed secured a simple majority, this should calm investors’ nerves. Nomura in a note said that this scenario would largely ensure policy continuity, enable a sustained focus on capex while consolidating fiscal finances, support macro financial stability and a focus on inclusive growth. Given its higher seat share in the lower house, and rising seats in the upper house, the government may focus on the more politically contentious reforms around the factors of production including land, labour and capital.

Indeed, early reports point to digitalisation of land records, and a streamlining of labour codes in the 100-day agenda. “We would add that, while the market’s reaction will be different in a BJP-majority versus an NDA majority scenario, the overall direction of economic policy would still be largely similar, in our view,” Nomura said.

JM Financial
Policy continuity will ensure opportunities in defence and capital goods sectors while valuation comfort is available in private banks and consumer space. Unlike in the past, we expect large caps to outperform SMIDs (small & medium stocks) in this post-election cycle.

Emkay Global Financial Services
Seshadri Sen, Head of Research & Strategist, Emkay Global Financial Services had recently told ETNow that the current economic policy, the continuity of the current economic policy would be maintained if the BJP wins a majority on its own or comes even close to that.

He is also of the view that the Modi government’s war on inflation will continue and he does not think we will see runaway inflation in India if the BJP is re-elected.

Infact, they (BJP/NDA) were the ones who codified the inflation targeting regime of the RBI and after a long time, the government and the RBI have been in sync in terms of how to adapt monetary policy to deal with high inflation.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

With an expected earnings growth of 15%, domestic brokerage firm Emkay Investment Managers expects Nifty to reach 24,500 by December 2024 and eventually surpass the level of 26,500 by December 2025.

“In the immediate near term, markets are going to focus on election results. An expected return of the NDA regime with a base case scenario of 330 seats will result in policy continuity along with major reforms on land, labour, and judiciary will support positive sentiment in the Indian markets. Over the long term, geopolitical developments and elections in the US and the UK will be watched out for with Fed rate cuts in the 3rd or 4th quarter of FY25,” Emkay said.

The brokerage has advised investors having a multi-cap approach with equal proposition in largecaps and midcaps to take advantage of a broad-based growth in Indian equity markets as most of the delta in the medium term is expected to come from the broader markets.

“BFSI, PSUs, and industrials are expected to do well. BFSI has led the earnings growth and seen a correction in valuation. Investment-related themes will come into play with power capex building up in the next 3 to 5 years. We are re-rating public sector units as some of the government entities will have an advantage in sectors such as defence, oil marketing companies and power financers,” said Manish Sonthalia, Chief Investment Officer, Emkay Investment Managers.After being in a slump post-COVID, pharmaceuticals are also expected to see a turnaround. “We are witnessing K-shaped recovery in the premier end of consumer discretionary, with the entry-level segment still not doing well,” he said.Emkay has suggested 5 themes to watch out for:1) Consumption: Per capita income moving up to $4,500 by 2029 will translate into higher consumption of discretionary items.

2) Manufacturing: China+1 and Europe +1 likely to benefit speciality chemicals, pharmaceuticals, automobiles and electronic manufacturing services.

3) Green energy: Solar and wind are expected to be the mainstream of energy transition in India. Value chain on the power side is expected to benefit in a big way.

4) Digitization & AI: India will be at the forefront of innovation in technology

5) Financialization of savings: Moving away from investments in fixed income to equity will benefit investment platform providers.