The Sensex plunged 608 points in early trade in a knee-jerk reaction to BJP-led NDA’s defeat in the Bihar elections on Monday, but later recovered to close down 143.84 points, or 0.6%, to 26,121.40, as finance minister Arun Jaitley’s remarks on reforms and Fitch’s reassurance on the country’s economic outlook soothed investors’ frayed nerves.
The NSE Nifty ended down 39.10 points, or 0.5%, to 7,915.20.
The Sensex has lost 469.19 points in the last four trading sessions.
Jaitley told TV channels that the poll results won’t have any impact on reforms. “Structural reforms will continue.”
Rating agency Fitch said the verdict is unlikely to have any major implications on the economic front. Positive statements on the election result from financial services majors, including Citigroup, Nomura and Bank of America Merrill Lynch, also boosted sentiment. Citigroup also said despite BJP’s defeat, it remained positive on India’s economic cycle and the market.
Of the 30 Sensex stocks, 19 ended in the red led by BHEL (down 3.86%), Dr Reddy’s (down 3.44%) and Wipro (down 1.99%).
“The Bihar election result is not expected to have an immediate impact on the government’s reforms. The government enjoys a large majority in the Lok Sabha; the composition of the Rajya Sabha will alter only marginally,” said Sanjeev Prasad of Kotak Institutional Equities. “The market will likely focus more on the second-quarter 2015-16 results. The Indian market is trading at reasonable valuations but will require the support of economic reforms, recovery and earnings.”
Analysts said retail investors tend to offload individual stocks amid nervousness. “Perceptions make more damages in the short-term than what fundamentals deserve,” said G Chokkalingam, founder and MD of Equinomics Research.