On Tuesday, June 4, the Indian stock market experienced a dramatic across-the-board selloff as vote-counting trends indicated a significant deviation from exit poll predictions. The emerging trends suggested that the Bharatiya Janata Party (BJP) was falling short of securing a clear majority. Consequently, the BJP-led National Democratic Alliance (NDA) was anticipated to only manage a slim majority to form the government at the Centre, causing a wave of investor anxiety.
Market Performance
Nifty 50 and Sensex Tumble
The Nifty 50 opened at 23,179.50, slightly lower than its previous close of 23,263.90, and plummeted 8.5% to hit an intraday low of 21,281.45. Similarly, the Sensex, which opened at 76,285.78 against its previous close of 76,468.78, dropped 8.2% to a low of 70,234.43. By the close of the trading session, the Sensex had suffered a substantial loss of 4,390 points, or 5.74%, settling at 72,079.05. Meanwhile, the Nifty 50 ended the day with a significant decline of 1,379 points, or 5.93%, at 21,884.50. This marked the largest percentage-term single-day drop for the Nifty 50 in over four years, since the market turmoil caused by the COVID-19 pandemic in early 2020.
ALSO READ: Decoding ‘All Eyes on Rafah’
Mid and Small cap Indices Hit Hard
The BSE Midcap index witnessed a deep loss of 8.07%, having fallen as much as 12% during the session, while the BSE Small cap index plunged over 10% in intraday trade, eventually closing with a loss of 6.79%. The volatility index, India VIX, surged 24%, highlighting the heightened nervousness among investors.
Investor Losses
The sharp selloff resulted in investors losing nearly ₹31 lakh crore in a single day, as the overall market capitalization of BSE-listed firms dropped from nearly ₹426 lakh crore in the previous session to approximately ₹395 lakh crore.
Top Nifty 50 Losers
A significant number of stocks in the Nifty 50 index ended in the red, with 37 stocks closing with losses. Notably, nine stocks saw declines exceeding 10%. Shares of Adani Ports emerged as the top losers, plummeting 21.40%, followed by Adani Enterprises, which fell 19.07%. Other notable losers included ONGC (down 16.23%), NTPC (down 14.52%), and Coal India (down 13.54%).
Top Nifty 50 Gainers
Amidst the widespread decline, a few stocks managed to buck the trend. Hindustan Unilever led the gainers with a rise of 5.78%, followed by Britannia (up 3.33%) and Nestle (up 3.27%).
Sectoral Performance
Major Sectoral Declines Among the sectoral indices, Nifty PSU Bank experienced the most significant decline, losing 15.14%. This was followed by Nifty Oil & Gas, which fell 11.80%, and Nifty Metal, which dropped 10.63%. The Nifty Bank index plunged 7.95%, while the Financial Services index declined by 7.86%.
FMCG Sector Outperforms Contrary to the overall market trend, the Nifty FMCG index managed to close 0.95% higher, buoyed by gains in stocks like Hindustan Unilever, Britannia, and Nestle.
Impact of Election Outcomes
Vinod Nair, the head of research at Geojit Financial Services, attributed the market’s plunge to the unexpected election results, which sparked a wave of fear among investors, reversing the recent substantial rally. However, Nair maintained that the market still expects stability within the coalition, led by the BJP as the major election winner. This expectation, according to Nair, should mitigate substantial downside risks in the medium term.
Market Choppiness and Investment Opportunities
Ajit Mishra, SVP of research at Religare Broking, forecasted continued market choppiness and advised participants to limit their trades and wait for stability. He suggested that investors could use the current market volatility as an opportunity to accumulate quality stocks available at attractive valuations.
Technical Analysis of Nifty 50
Breach of Crucial Support Levels
Shrikant Chouhan, the head of equity research at Kotak Securities, noted that the market’s sharp selloff in the morning led to the breach of crucial support levels, particularly the 20-day SMA (simple moving average) of 22,500 for Nifty 50 and 74,000 for Sensex. This breach intensified selling pressure throughout the day. The index formed a long bearish candle on the daily charts and is now trading below short-term and medium-term averages, which is generally negative for market sentiment.
Resistance and Support Zones
For traders, Chouhan identified the 50-day SMA, around 22,400 for Nifty 50 and 73,500-74,000 for Sensex, as key resistance areas. On the downside, he pinpointed 21,600-21,300 for Nifty 50 and 71,000-70,200 for Sensex as critical intraday support zones. Chouhan advised traders to remain cautious over the next few trading sessions due to the extremely volatile and uncertain market conditions.
The Indian stock market’s massive selloff on June 4 reflects the heightened anxiety and uncertainty among investors triggered by unexpected election outcomes. Despite the current volatility, experts believe that underlying expectations of political stability and potential investment opportunities in quality stocks may provide some cushion against further market declines. Traders and investors are advised to approach the market with caution, keeping an eye on key technical levels and broader economic developments.
