Market history · Emerging markets ·
India's markets tumble on a narrower election win
India's election result on 4 June 2024 left the BJP short of a parliamentary majority on its own, so Prime Minister Narendra Modi would need allies to govern. India's Nifty 50 closed 5.93% lower and the Sensex 5.74% lower, their worst day in four years, after falling as much as 8.5% in the session, Al Jazeera reported.
Markets had risen to records on exit polls that had forecast a landslide. Analysts said the smaller win raised questions about the pace of land, labour and capital reforms, and shares of state-owned companies and banks were hit hardest. The indices rebounded the following day.
The episode is a clear example of expectations, not results, driving prices: the same outcome would have been welcomed had it been forecast.
The takeaway
A market priced for a certain outcome can fall on a good result that is merely worse than hoped. Expectations are part of the price.
Sources
This is a retrospective about a past event, provided for general information. It is not investment advice, does not describe RockLake's positioning at the time, and past performance is not a guide to future performance. Read the risk warning.