MUMBAI: Debt and money markets followed the drastic decline on Dalal Street after a surprise lower-than-projected numbers for the ruling NDA in this Lok Sabha elections. The rupee tanked near record low of 83.53 against the greenback, down 0.47% from the previous close of 83.14, while the benchmark bond yields jumped 12 bps to 7.06%.
The equities were the worst hit, plunging close to 9% intra-day and recouped towards the end t some extent. The Sensex closed 5.74% down and broader Nifty plummeted 5.96% at close as the Narendra Modi-led coalition failed to garner as much seats as it was expected earlier, though the ruling alliance achieved simple majority. This is the worst plunge in over four years for the markets.
What led to the market mayhem is that exit poll projections, all of which gave near sweep for Modi going way off the actual voting pattern.
Following the mayhem in the equities market, the rupee dropped to as low as 83.5175 against the greenback, its weakest since May 15, 2024, which was it historic worst, versus the previous close of 83.1425. This is also the worst fall for the rupee in over a year.
Similarly, the benchmark 10-year bond yields rose as much 12 basis points to close 7.06% and ended at 7.0382, following its previous close at 6.9438, making it the biggest daily rise in 8 months for the benchmark bonds as vote-counting trends showed that the BJP would not win a simple majority on its own and that even the NDA alliance would cobble up a narrower majority, much lower than expected.
The yield also witnessed its biggest single-session climb since October 6, 2024. Way below the simple majority, Modi will be at the mercy of his allies even for simple majority in the 543-member house, where the simple floor majority is 273. Having to depend on allies to form the government could introduce some uncertainty in policymaking. The market fears that a thin majority may force the government to undertake more populist measures, which may impact the fiscal consolidation trajectory.
Yellow metal shines
The gold prices jumped Rs 700 for the 22 carat at 66,950 per 10 gram and Rs 760 for the 24 carat at 73,020. In the global markets, spot gold at Comex was trading at $2,335 per ounce, up $15 from the previous close. Gold rose on Tuesday as disappointing US manufacturing data raised hopes that the Federal Reserve will have room to lower borrowing costs this year, said Saumil Gandhi, senior analyst of commodities at HDFC Securities.