On Tuesday, it appeared that Indian Prime Minister Narendra Modi was poised to continue leading a ruling coalition, but his Hindu nationalist party experienced a loss of its outright majority for the first time in last ten years, defying expectations of another overwhelming victory.
This outcome unsettled investors, leading to a sharp decline in stocks as initial results indicated that Modi would, for the first time since his 2014 landslide victory, rely on at least three disparate regional parties whose political allegiances have fluctuated over time.
Analysts suggest that this could inject some uncertainty into policymaking in the world’s most populous democracy, after a decade of Modi’s firm leadership.
In 2014, Modi’s Bharatiya Janata Party (BJP) secured a majority on its own, ending India’s era of unstable coalition governments, and repeated this achievement in 2019.
said people had placed their faith in the BJP-led coalition for a third time and it was historic, in his first comments since counting of votes began.
“The blessings of the people for the third time after 10 years boosts our morale, gives new strength,” Modi told cheering BJP members at party headquarters in New Delhi.
“Our opponents, despite being united, could not even win as many seats as BJP won.
The opposition INDIA alliance, led by Rahul Gandhi’s centrist Congress party, was leading in over 230 seats, surpassing initial forecasts. Congress alone was leading in nearly 100 seats, nearly doubling its count of 52 from 2019—an unexpected surge likely to bolster Gandhi’s stature.
Addressing reporters, Gandhi stated, “The country has clearly and decisively expressed its desire: we reject Narendra Modi and Amit Shah’s governance style, and we disapprove of how they’ve managed the nation.” He referred to Modi’s influential deputy, Home Minister Shah, emphasizing, “This sends a significant message.”
When asked about the opposition’s plans, Gandhi mentioned that Congress would engage in discussions with its allies on Wednesday to chart out the next steps, hinting at the possibility of forming a government.
Market turmoil .
Investors had initially welcomed the prospect of another term under Modi, anticipating continued robust economic growth and business-friendly reforms. However, concerns arose during the counting process due to the narrow margin of victory.
“The crucial question is whether the BJP can maintain its majority as a single party. If not, will its coalition partners be able to uphold economic development, particularly in infrastructure?” remarked Ken Peng, Head of Investment Strategy, Asia, at Citi Global Wealth in Singapore.
Peng speculated, “We might witness a more expansive fiscal policy aimed at bolstering welfare and other local government expenditures.”
Neelesh Surana, Chief Investment Officer at Mirae Asset Mutual Fund, observed that the market’s reaction seemed exaggerated, driven by a sense of disbelief. “Nevertheless,” he added, “despite the election outcome, there’s likely to be a continuation of government policies.”
Modi, aged 73, who initially rose to power in 2014 on promises of growth and reform, aimed to become only the second Prime Minister, after India’s independence leader Jawaharlal