Mumbai/New Delhi, April 27: Nervous investors dumped stocks and business leaders went into deep huddles today to assess the implications of a hung Parliament, suggested by exit polls.
The stock market recorded the biggest loss in three years, knocking Rs 55,000 crore off shareholders’ wealth.
The 30-scrip sensitive index of the Bombay Stock Exchange plunged by over 213 points — the biggest fall since March 2001 — to close at 5712.28 from the previous close of 5925.58.
Investors scrambled to dump stocks on fears that a tight finish in the polls could nix the process of reforms with the new government being forced to pander to the whims of fringe parties outside the alliance.
“The markets are very nervous,” said Ramesh Damani, a Mumbai broker. “A result that is too close to call could compromise the reforms agenda.”
Even as investors voted with their feet, industrialists hunkered down with their advisers for some crystal-ball gazing to determine what the contours of the new government might be and how this could impact their investment decisions in the near term.
The industrialists were clearly spooked by the prospect of a fractured mandate. “We do not want a hung Parliament,” said Swati Piramal, the managing director of drug maker Nicholas Piramal. “We want either the BJP or the Congress to form the government... we have seen the manifestos of both.”
Delhi-based businessman Arun Bharat Ram said: “I think the NDA government has been doing a good job for the past six years and they should be given an opportunity to see if they go through with the reforms which they promised.”
The biggest worry for business was how stable the inevitable coalition — led by the BJP or the Congress — would be. “The NDA has demonstrated its ability to run a coalition. In case the Congress comes in, there would be cause for concern as they lack experience in handling large coalitions,” said stock market takeover artist Abhishek Dalmia.
On Dalal Street, the gloom had descended at the start of trading itself with the sensex opening with a huge gap of 57 points from Friday’s close. The market opened today after a long weekend with polls held in the country’s business capital yesterday.
“These are volatile times,” said Motilal Oswal, an institutional broker, explaining today’s sharp downturn in share prices. “There was all-round selling, but the indications are that it was only retail investors who sold in panic. In these times, one has to accept volatility as triggers like opinion polls and exit polls are a harsh reality.”
The market drew solace from the fact that foreign investors were not big sellers. The volumes were healthy, indicating that bargain hunters were scooping up shares at lower prices.
“But how much can you buy'” asked a distraught Jigar Shah, research head at Kisan Ratilal Choksey, a broking outfit. “The markets have clearly over reacted.”
Analysts like Jigar admitted that the exit polls had sparked the huge sell-off.