A day after they surged on exit poll predictions of a comfortable win for the current Narendra Modi-led NDA government, both the BSE Sensex and NSE Nifty 50 cracked over 4 per cent in late morning trades as the actual counting of votes showed a far more close flight between the ruling party and opposition INDIA Bloc.
The Sensex was down close to 3,400 points or 4.5 per cent to 73,056 levels and the Nifty tumbled over 1,100 points or 4.7 per cent to 22,154 points, reversing Monday's gains.
On Monday, both the benchmark indices had jumped 3.3 per cent, touching new closing highs as investors had cheered the ruling party winning the elections with a huge majority. However, in comparison to the exit polls predicting the NDA to win easily (the average of 12 exit polls gave 366 seats to the NDA and around 145 to the INDIA Bloc), the fight was far more closer, with the BJP leading in around 285-290 seats, while the opposition alliance leading in over 230.
"The steep fall (in market) is due to the results so far falling short of the exit polls, which the market had discounted yesterday. If BJP doesn't get a majority on its own, there will be disappointment and this is getting reflected in the market," said V.K. Vijayakumar, chief investment strategist at Geojit Financial Services.
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On the Sensex, 24 of the 30 stocks were trading in the red. PSUs like NTPC, Power Grid, State Bank of India were down anywhere between 11-13 per cent. Banks, Automobiles, and steel companies were among the major losers on Tuesday.
Select FMCG stocks like Hindustan Unilever, Nestle India, Asian Paints, pharmaceutical major Sun Pharma and tech stocks TCS and HCL Technologies were among the only Sensex gainers.
The correction in midcap and smallcaps was far more severe. The BSE Midcap index was down 6.6 per cent in late morning trades, and the smallcap index had tumbled 6 per cent.
"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 in FMCG stocks," said Vijayakumar.