Sensex, Nifty plummets nearly 6% today: What lies ahead for investors

Indian equity benchmarks fell sharply on Tuesday after vote-counting showed Prime Minister Narendra Modi’s BJP-led alliance was led for a majority, but the tally was narrower than predicted in exit polls. The 30-share BSE Sensex pack nosedived 4,390 points or 5.74 per cent to settle at 72,079 and the broader NSE Nifty index moved 1,379 points or 5.93 per cent down to 21,885 level.

Broader indices (mid- and small cap) also felt the pain as mid-cap 100 cracked 7.88 per cent and small-cap 100 slumped 8.23 ​​per cent.

Investors were disheartened as the BJP failed to secure a majority on its own in the 2024 Lok Sabha elections, despite the NDA achieving an overall majority, said Prashanth Tapse, Senior VP (Research) at Mehta Equities. The market remains uncertain and volatile, with the India VIX (fear index) surging 31 per cent to above 28 level, he suggested.

The exit polls were horribly wrong, said Vikram Kasat, Head of Advisory at Prabhudas Lilladher (PL). “The speed of social reforms may take a hit, depending on how the new government approaches its agenda. While the mood on the street is damp now, things could change equally quickly. The uncertainty might create initial apprehension, but there’s potential for significant positive developments once the new government settles in and starts implementing its policies,” Kasat stated.

The PL expert also mentioned that PSU stocks may lose some momentum in the short term, but they should return to the limelight soon. The uncertainty might create initial apprehension, but there’s potential for significant positive developments once the new government settles in and starts implementing its policies, Kasat further stated.

Aditya Khemka – Fund Manager at InCred Asset Management said market could remain sideways in the near future and businesses with strong earnings momentum and reasonable valuations will outperform.

Siddarth Bhamre – Head of Research at Asit C Mehta Investment Intermediates, said, “Stock markets have been expecting a complete majority for the BJP and a thumping victory for the NDA. Exit polls too cemented the expectations. Markets had factored in the best possible outcome and valuations are rich. However, the market is aware of the challenges associated with coalition. Now with election results not being one-sided, we are witnessing profit booking.

Bhamre pointed out that spaces like FMCG and IT may see less damage as defensive buying along with valuation comfort is likely to keep them immune from this correction.

Rahul Singh, CIO-Equities, Tata Asset Management highlighted that risk-reward in large caps and underperforming sectors like banking and consumer appears more favourable.

“Though we expect some correction to continue in the market, it would not be fair to consider it as the end of the bull market. Most likely this correction may turn out to be a hiccup in the long-term bull run,” he added .

Nifty outlook

“Nifty finally settled the day on a negative note at 21,884.5. The volatility index (VIX) hit its highest level since February 2022, reaching 31.71. Technically, the index will find immediate support around 21,800, followed by 21,250 level. near run, the 22,800-23,340 zone will serve as significant obstacle,” said Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C Mehta Investment.

Nifty Bank outlook

“Nifty Bank opened on a negative note and remained under pressure throughout, finally settling the day on a negative note at 46,928.60. On the downside, 46,350 will act as a key support for the index, with resistance near 51,130 level,” Yedve stated.