On 4 June 2024 it emerged that Narendra Modi’s BJP had won 240 seats, short of an outright majority, and will govern in coalition. How the market reacted and what is worth watching now.
India held a general election over six weeks, with about 640 million votes cast. The results were announced on 4 June 2024: Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) won 240 of the 543 seats in the lower house, the Lok Sabha, 63 fewer than in 2019, leaving it 32 short of the outright majority, set at 272. The exit polls, which had given Modi a wider victory, did not come true.
A coalition government
The National Democratic Alliance (NDA), the coalition led by the BJP, won 293 seats, above the majority mark, and Modi was able to form a government. He was sworn in for a third term as prime minister on 9 June, something only Jawaharlal Nehru had achieved before. But it is the first time since 2014 that his party needs its allies to govern. The NDA had won 353 seats in 2019, 60 more than now. The main opposition bloc, INDIA, led by the Congress party, won about 232 seats; the Congress itself won 99, up from 52 in 2019.
Two allies are decisive: the Telugu Desam Party (TDP), from Andhra Pradesh, with 16 seats, and the Janata Dal (United) (JD(U)), from Bihar, with 12. They are joined by Eknath Shinde’s Shiv Sena, with seven, and the LJP (Ram Vilas), with five. With 293 seats, the coalition has a margin of 21 over the 272 needed: if the TDP and the JD(U), which together hold 28, were to leave at the same time it would lose its majority, although the departure of either one alone would not be enough. Some analysts point out that these partners will carry more weight in decisions than in previous parliaments.
The market’s reaction
On Monday 3 June Indian stock markets had risen sharply on the back of the exit polls: the Sensex gained more than 2,500 points and the Nifty about 700, its biggest jump in four years. On Tuesday 4 June, with the first results, the Nifty 50 fell 5.93% and closed at 21,884, and the Sensex lost 5.74%, to 72,079. It was the worst session since March 2020, and during the day the Sensex lost more than 5,000 points, over 6%. Part of that fall undid the previous day’s rise, which had been based on polls that did not come true.
The market recovered quickly. On Friday 7 June the Sensex closed at 76,693, above the 76,470 of Monday 3 June. That same day the Reserve Bank of India (RBI) kept its benchmark interest rate at 6.5%, for the eighth consecutive meeting.
What to watch
The underlying question for anyone with business or investments in India is what pace economic reforms will have under a coalition government: infrastructure investment, industrial production, openness to foreign investment. It will show in the new government’s first decisions and in its budget, and cannot be deduced from the outcome of one stock market session.
For a Spanish family or company with exposure to India, whether through subsidiaries, suppliers, funds that invest in emerging markets or direct investments, a 6% fall in a day and a recovery within three sessions show how far an election result can move prices. It is worth knowing how much India weighs in the portfolio or the supply chain and in which currency the assets are held. This note is general information and not investment advice. Ask your adviser how it applies to your case.
Modi remains in power, but this time he will depend on his partners.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
