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Election Results: Panic Selling or Right Time to Buy, Find Out

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Election Results: Panic Selling or Right Time to Buy, Find Out

Tuesday witnessed a bloodbath in the stock market. The Sensex plummeted by over 6,100 points, marking its most significant intraday decline in the last two years. This drastic drop resulted in disappointment, driven by early election results exit polls hinting at a potential victory for the NDA alliance, favored by Dalal Street.

The Nifty saw its largest decline since March 2020, erasing all gains accumulated in the current calendar year. Surpassing an 8.5% decline, Tuesday’s steep plunge dragged the Nifty into negative territory for 2024. Notable among the major losers on the Nifty were Adani Ports, Adani Ent, ONGC, NTPC, and Coal India.

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Source: NSE

The market suffered a staggering loss of ₹46 lakh crore in market capitalization. Contrary to the predictions of exit polls, the unexpectedly tight election race reverberated through financial markets, triggering heightened volatility and widespread sell-offs.

After-effects of Election Results

  • Shares of all 10 Adani Group companies fell as the results of the Lok Sabha election’s vote counting revealed that NDA might not win as many seats as predicted by exit polls. Adani Ports led the decline with a 20% crash.
  • Larger markets drove Tuesday’s decline, as the medium, small, and microcap indices began to trade in deep red at 12:15 p.m. Around this time, the Nifty Midcap 100 index dropped by more than 7%, or 3,700 points, to reach its lowest point of the day, 49,623.10.

5 Factors Behind the Stock Market Crash on Election Result Day

Several factors contributed to this market turmoil:

  1. Lok Sabha Election Results: Investors have been uncertain since voting began for the Lok Sabha elections this morning. The INDIA block showed better-than-expected performance, but higher-level profit booking triggered widespread selling on Dalal Street.
  2. Tech Sector Concerns: Before the U.S. Federal Reserve’s rate decision, tech sector worries loomed large. Global shares dipped, and the yen slid after the Bank of Japan ended eight years of negative interest rates.
  3. Sudden Shift in Investor Sentiment: The sudden shift in sentiment rattled investors, triggering panic selling across various sectors. Stock indices plummeted as uncertainty gripped the market, erasing significant gains made in the recent past. Both domestic and foreign institutional investors were quick to offload their holdings, resulting in a downward spiral.
  4. Banking and infrastructure were the worst hit: The financial sector bore the brunt of the sell-off, with banking stocks leading the decline. Concerns over potential policy changes and regulatory uncertainty weighed heavily on banking shares, dragging down the broader market indices. Additionally, sectors sensitive to government policies, such as infrastructure and utilities, witnessed substantial losses.
  5. Global Factors: The volatility in the stock market was further compounded by global factors, including rising inflationary pressures and geopolitical tensions. The specter of inflation loomed, fueling apprehensions of tighter monetary policy measures by central banks worldwide. Geopolitical uncertainties, ranging from trade tensions to regional conflicts, added to the sense of unease among investors, prompting a flight to safety.

Amidst the chaos, certain sectors, such as pharmaceuticals and consumer goods, managed to hold their ground, offering some respite to investors seeking refuge from the market turmoil. However, the broader sentiment remained decidedly bearish, with the fear of further downside weighing heavily on market participants.

Machines Amplify Market Swings

The role of technology in shaping market dynamics could not be overlooked, as algorithmic trading and high-frequency trading triggered the volatility. Automated trading systems, programmed to react swiftly to market developments, amplified the magnitude of price swings, adding to the sense of instability.

Regulators Aim to Reassure Investors

In response to the heightened volatility, regulatory authorities were quick to reassure investors about the financial system’s stability and the economy’s resilience. The Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) issued statements emphasizing their commitment to maintaining orderly market conditions and ensuring the smooth functioning of financial markets.

A Word of Caution

Market experts caution against instant reactions and urge investors to adopt a long-term perspective amid the prevailing uncertainty. According to experts, volatility is an inherent feature of financial markets, and prudent investors should use such periods of turbulence as opportunities to reassess their investment strategies and identify potential bargains.

Economic Stronghold

The election outcome, though uncertain, is viewed as a major factor in the broader scheme of things. Economic fundamentals, corporate earnings, and global macroeconomic trends are deemed to be the primary drivers of long-term market performance. As such, while the short-term movements in the stock market are cause for concern, they do not necessarily indicate the economy’s underlying strength.

The Journey Ahead After Election Results

Market participants remain cautiously optimistic about the prospects of a swift recovery once the dust settles. The resilience of the Indian economy, coupled with favorable demographic trends and ongoing structural reforms, is expected to provide a solid foundation for future growth. However, the path ahead is likely to be met with challenges, requiring good risk management and a disciplined approach to investing.

The Final Word

The sharp decline in the stock market, driven by the unexpectedly tight election race, underscored the inherent volatility and uncertainty that pervaded financial markets. While the short-term outlook remained clouded by uncertainty, investors were advised to maintain a long-term perspective and focus on fundamentals. 


  1. Why did the stock market decline during election results?

    The stock market decline was majorly due to a shock from election results.

  2. How much wealth was lost due to election?

    A significant investor wealth, estimated at Rs. 46 lakh crore, was lost.

  3. What should investors do after the market crash due to election?

    Investors should consider their risk tolerance. While some may choose to hold their positions, others might consider buying more if they believe the markets will rebound after the results.

  4. How have the regulators reacted to the market volatility?

    In an effort to calm investor anxieties, regulatory bodies like SEBI and RBI have issued public statements reassuring investors about financial system stability and their commitment to orderly markets.

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I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.

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