Tuesday brought a sharp decline to the Indian stock market, reducing the total value of shares by $390 billion (when the NSE Nifty 50 index fell by almost 6%). This was the biggest drop since the pandemic. The market collapse occurred after Narendra Modi's party won significantly fewer seats than expected in the Indian elections. Mumbai's Nifty 50, the main stock market index, dropped as much as 8.5% during the day and then closed 5.9% lower amid news that the coalition led by the ruling Bharatiya Janata Party (BJP) is likely to win about 300 seats in India's parliament. Although this gives Prime Minister Modi a small majority, it does not match the projected 400-seat margin predicted by previous exit polls. Also after this news, the yield on 10-year government bonds rose, and the Indian rupee fell by 0.5% against the US dollar. Before the vote counting began, traders were counting on a convincing victory for Modi, but the current results may significantly complicate the implementation of his planned reforms. The sudden change in the preliminary results and surveys came as an unexpected shock to Indian investors.
