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Indian Prime Minister Narendra Modi looked set to retain power at the head of his ruling coalition on Tuesday, but his Hindu nationalist party lost its majority for the first time in a decade, defying expectations that it would again win a landslide victory.
The results spooked investors and sent Indian stocks plummeting because it made it clear that for the first time since coming to power in 2014, Modi would be relying on at least three different regional parties whose political allegiances have been shaky over the years.
| Ticker | safety | last | change | change % |
|---|---|---|---|---|
| India | ISHARES TRUST MSCI India ETF | 51.48 | -3.33 | -6.08% |
| Sumin | ISHARES TRUST MSCI India Small Cap Index | 72.02 | -4.91 | -6.38% |
| Indy | ISHARES TRUST India 50 ETF | 49.89 | -2.94 | -5.57% |
Analysts say this could create uncertainty in policymaking in the world’s most populous democracy after a decade of Prime Minister Modi’s iron fisted rule.
Exchange-traded funds that track India’s stock market fell amid the political changes, with the iShares MSCI India ETF on track for its biggest percentage drop since Dec. 13, 2021, when it fell 7.71%, according to tracking by Dow Jones Market Data Group.
The iShares MSCI India Small Cap ETF and the iShares India 50 ETF also fell sharply.
| Ticker | safety | last | change | change % |
|---|---|---|---|---|
| Sumin | ISHARES TRUST MSCI India Small Cap Index | 72.05 | -4.87 | -6.33% |
| Indy | ISHARES TRUST India 50 ETF | 49.89 | -2.94 | -5.57% |
ETFs give foreign investors easier access to the Indian market than direct investment in Indian stocks, which can take nine months for them to set up a local account, Malcolm Dawson, head of emerging markets strategy at ETF provider Global X, said in January.
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Prime Minister Modi’s Bharatiya Janata Party (BJP) won a majority of seats on its own in 2014, ending India’s era of unstable coalition governments, and repeated the feat in 2019.
Indian Prime Minister Narendra Modi speaks at the Bharatiya Janata Party (BJP) headquarters on the night of the announcement of election results, Tuesday, June 4, 2024, in New Delhi, India. (Prakash Singh/Bloomberg via Getty Images)
In his first comments since the vote counting began, Prime Minister Modi said it was historic that the people had placed their trust in the BJP-led coalition government for the third time.
“Receiving the people’s congratulations for the third time in 10 years has boosted our morale and given us new strength,” Modi told cheering BJP workers at the party headquarters in New Delhi.
“Even though our opponents were united, we could not win as many seats as the BJP did.”
Modi promised to work harder and take “big decisions”, naming electronics, semiconductors, defence manufacturing, renewable energy and agriculture as key areas for his third term, without giving details.
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Indian Prime Minister Narendra Modi addresses supporters at the Bharatiya Janata Party (BJP) headquarters on the night of the announcement of election results, Tuesday, June 4, 2024, in New Delhi, India. (Prakash Singh/Bloomberg via Getty Images)
Investors had welcomed the prospect of Modi being re-elected, betting on strong economic growth and business-friendly reforms in the coming years, but the margin of victory was raising concerns as the vote count progressed.
Neelesh Surana, chief investment officer at Mirae Asset Mutual Fund, said the market had overreacted in disbelief. “But the government’s policies are likely to continue in principle regardless of the verdict,” he said.
The 73-year-old Modi, who took power in 2014 promising growth and change, was seeking to become only the second prime minister after independence leader Jawaharlal Nehru to win three consecutive terms.
Reuters’ YP Rajesh, Krishn Kaushik and Nikunj Ohri contributed to this report.
