Daily Brief - Nifty Nosedive

TLDR: Indian stocks took a nosedive on Tuesday, recording their worst day in over four years, after Prime Minister Narendra Modi's coalition secured a narrower-than-expected election victory.

Mumbai's NSE Nifty 50, the primary stock market index, plummeted as much as 8.5% during the session before closing 5.9% lower.

Investors were spooked by the news that Modi's ruling Bharatiya Janata Party (BJP) and its allies are projected to win about 300 seats in parliament, falling short of the 400-seat landslide predicted by earlier exit polls.

This dramatic drop marked the Nifty 50's worst performance since the pandemic's onset in 2020, wiping out nearly $390 billion in market value, according to Bloomberg data. The 10-year government bond yields rose, and the Indian rupee depreciated by approximately 0.5% against the US dollar.

The stark contrast to Monday’s market, where stocks hit record highs on expectations of a landslide victory for Modi, underscored the volatility. Analysts highlighted that a reduced majority could hinder Modi's ability to implement policy changes.

Scenario Spotlight: What next?

The chart above shows the 1 month response from the Nifty based on the past 12 episodes when the index fell 6% in 1 day.

Market Movers: Potential future winners & losers

Here are the top and bottom performing Indian stocks on a 1 month horizon, based on previous 6% one day drops in the Nifty index:

Top 3 Performers:

1. Adani Green Energy: 48.43%
2. Avenue Supermarts: 19.36%
3. Adani Transmissions Limited: 18.97%

Bottom 3 Performers:

1. Oberoi Realty: -31.47%
2. Tube Investments of India: -34.74%
3. AU Small Finance Bank: -45.68%

Earnings Spotlight: NIO reports tomorrow

The company reported a 3.2% year-over-year decline in Q1 vehicle deliveries, impacted by intense competition and economic pressures. Investments in expanding its battery-swapping network and price cuts to counter competition likely hurt profit margins.

Analysts expect Nio to report Q1 sales of $1.44 billion, an 8% year-over-year decrease, and a loss of $0.3 per share, slightly better than last year's $0.35 loss.