Surprise election result rattles India

The results of the 2024 Indian general election, which saw 640 million people vote, were released on June 4, with the outcome surprising many investors.

The ruling Bharatiya Janata Party (BJP), widely forecasted to secure a landslide victory, fell short of an overall single-party majority. Prime Minister Narendra Modi will now look to form a government with the support of coalition partners as he begins his third term in office.

The unexpected result led India’s benchmark Nifty 50 Index to plunge almost 6% on June 4, before recovering.

“Markets do not like uncertainty,” says Kunjal Gala, Head of Global Emerging Markets at Federated Hermes Limited. “Almost overnight the case for India, which was super certain, has become less so.”

The shape of the next government, including the selection of ministers and its policy priorities, will be crucial to assess the country’s future macroeconomic trajectory, Gala adds. “Reforms are crucial to realize the country’s potential and investors’ lofty expectations may have to reset.”