New Delhi: The vote counting day on June 4, Tuesday, witnessed the worst market session in the last four years, thanks to exit polls predicting a National Democratic Alliance sweep, which initially made the markets outperform.
According to Business Standard, in the last three elections, the stock market had gained an average of about 3% on the day of exit polls.
Nifty50 recorded its single-biggest gain in three years on June 3 – a day before the 2024 election results were declared. Investors earned Rs 14 lakh crore.
However, on the next day, investors lost nearly Rs 40 lakh crore as Sensex and Nifty50 plunged 6%. Adani stocks were the hardest hit, while FMCG stocks gained.
But on June 5, Wednesday, markets staged a strong rebound, with the Sensex and Nifty50 surging over 2%. Meanwhile, all sectors are trading in the green.
Sensex rose 2303.19 points, or 3.20%, to close at 74,382.24 on the BSE on Wednesday. Nifty50 rose 735.85 points, or 3.36%, to end at 22,620.35 on the NSE on Wednesday.
Election outcomes and market sentiments
Election outcomes significantly influence market sentiments. In 2004, the markets fell when the Bharatiya Janata Party lost power. In 2009, it gained when the Congress retained power. The year 2014 saw a pre-market rally in anticipation of Narendra Modi winning the polls, Sunil Damania, chief investment officer at MarketsMojo Asset Management, had written on April 4 in the Economic Times.
But on June 4, market confidence shattered after predictions were made for high returns.
This confidence was boasted by Amit Shah, who had told NDTV Profit, ahead of vote counting day: “Buy before June 6. It will shoot up.”
“Stock market crashes should not be linked with elections, but even if such a rumor has been spread, I suggest that you buy (shares) before June 4. It will shoot up,” he had said.
Narendra Modi had also expressed confidence that markets would touch record highs on June 4.
“I can say with confidence that on June 4, as BJP hits record numbers, the stock market will also hit new record highs,” Modi had told ET on May 27.
Influencing market sentiments
Amid the market crash and the significant losses incurred by investors, a question arises, should political leaders comment confidently on market movements?
“There should be high levels of freedom of speech. There is a marketplace for ideas. Everyone should be free to express their views. The receivers of information or views need to exercise critical thinking on what sources are trusted and what causes them to change their minds,” Ajay Shah, a markets expert who was a member of the SEBI committee on the evolution of markets, told The Wire.
In terms of what lessons retail investors should learn from the market crash, he said, “For long-term investors, the right idea is to hold equities as a path to high long-run performance, and they should not get worried about day-to-day fluctuations. Globally, diversified portfolios are better as there is reduced exposure to any one country.”
