Indian stocks have received a lot of attention recently. And for good reason. Through yesterday, broad benchmark Indian indexes were some of the best performing assets to own over the last year, with the MSCI India more than 35% over the last 12 months. (That outclassed the Nasdaq Composite, the S&P 500, and the Nikkei 225, by the way.)
Then came the less-than-stellar results for Indian Prime Minister Narendra Modi’s ruling BJP party in nationwide elections that emerged Tuesday.
While Modi is set to retain power, according to early results, the BJP appears poised to lose its outright parliamentary majority for the first time in a decade, defying expectations for a landslide victory.
Indian stocks plunged on the news, with the benchmark NSE Nifty tumbling nearly 6%, its worst day since the pandemic struck in early 2020.
It’s tempting to read that rout as simply a measure of just how much investor confidence there was in the Modi administration’s management of the economy. (To be fair, Indian growth has been a bright spot under his rule.)
But it’s worth pointing out that the big drivers of the downturn in the Indian markets Tuesday are the large, often politically-connected, conglomerates that dominate the Indian economy.
For instance, Reliance Industries — the massive retail, textile and petrochemical conglomerate run by tycoon Mukesh Ambani, a well-known supporter of the Prime Minister — plunged 7.5% on the election news, its worst day since 2020. Shares of companies controlled by Modi associate Gautam Adani, considered Asia’s richest man, were hammered as well. Adani Enterprises Ltd., which has faced inquiries over its accounting practices, dropped nearly 20%.
As the Wall Street Journal reported back in 2023, the value of these firms has exploded under Modi’s rule, as they benefited from subsidies and privatization plans. Such cozy relations became the core of corruption allegations that opposition politicians leaned on in the run-up to the vote.
"The public directly related Modi and Adani,” said opposition politician Rahul Gandhi, on Tuesday. “If Modi loses, the stock market says Modi is gone so Adani is gone. There is a direct relationship of corruption between them.”
