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Despite NDA’s decisive victory in the Bihar elections, the Indian stock market turned red, surprising many investors. The initial exit poll results had boosted markets, but profit booking, global market trends, rising crude prices, and foreign institutional selling caused the fall.
Profit Booking Triggers Market Fall Despite NDA Win
Mumbai: The question of why the stock market remained in the red even after the news of the NDA's victory in the Bihar Assembly elections is resonating with investors. The market had surged after the exit polls, but when the results showed a landslide victory for the NDA, both the Sensex and Nifty fell.
On Wednesday, the Sensex rose 750 points and the Nifty 230 points after exit polls predicted a landslide victory for the NDA. Investors were ecstatic. However, on the day of the results, the Sensex fell 376 points to 84,102.96, and the Nifty 110.71 points to 25,771.40. Shares of major companies fell by up to 3%.
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According to experts, the stock market is influenced not by any party but by "stable and decisive leadership." When exit polls are released, investors assume the predictions are certain and start buying. When the results are confirmed, these same investors engage in profit booking, leading to a sudden drop in the market.
Investors buy shares at low prices and sell them at higher prices when the results are announced. This process pushes the market into the red on results day. This has been observed in previous elections, such as in 2015 and 2020, when the Sensex and Nifty fell despite the NDA's victory.
Falls in foreign markets, such as the NASDAQ falling 2.3% and the S&P 500 and Dow Jones falling by approximately 1.7%, also put pressure on the Indian market. Rising Brent crude prices are also increasing investor concerns. For a major oil importer like India, higher oil prices put pressure on inflation.
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Foreign institutional investors are consistently selling. There has been massive outflow of investments over the past four days, causing market volatility. The India VIX index rose more than 1% to 12.30, indicating the possibility of further volatility.
The market decline following the Bihar election results cannot be attributed solely to the political outcome. It is a combination of profit-booking, global market conditions, oil prices, and foreign investor activity. Experts believe that long-term market movements will depend on corporate earnings and the country's economic growth.
