Celebrating too early can turn potential triumph into disaster, a lesson vividly demonstrated this week. The Indian equity market experienced one of its most volatile sessions due to an unexpected election outcome. Before the results, exit polls predicted a decisive BJP win, sparking optimism. 

Consequently, on June 3, 2024, the market saw gains of 3-4% in frontline indices, with the BSE Sensex surpassing 76,700 and Nifty 50 exceeding 23,300, both hitting lifetime highs.

However, this optimism quickly dissipated. As actual election results came in on June 4, the markets reacted sharply. The BSE Sensex and Nifty 50 plummeted by 5-6%, while mid-cap and small-cap indices declined by 8-9%. This dramatic swing was one of the largest ever for frontline indices, with the Sensex fluctuating 6,066 points, an 8% drop from the day’s opening, and the Nifty50 seeing an intraday swing of nearly 1,300 points, doubling its previous record.

Significant volatility can trap investors and traders in unfavourable positions, leading to panic-selling or buying at inflated prices. Never count your chickens before they hatch; the game isn’t over until the final whistle. The market has since regained 6% of the initial pullback and is trading above pre-election levels. 

As the new government’s policies become clear, we expect market volatility to stabilize. The Sensex hit it all time again on Friday and the Nifty50 index was 50 points away from its all-time high as the NDA coalition agreed to make Narendra Modi the Prime Minister of the country for the third time.

Performance of sectors this Week:

Top PerformanceLeast Performance
NIFTY IT 8.49%NIFTY Energy -0.32%
NIFTY FMCG 7.01%NIFTY PSU Bank -1.63%
NIFTY Auto 6.5%
NIFTY Media 5.37%
NIFTY Realty 4.56%

Performance of Stocks:

Top GainersTop Losers
M&M +14%Adani Enterprise -5.7%
Tech Mahindra +11%BPCL -5.47%
Hindustan Unilever +10%Adani Port -4.08%
WIPRO +10%LT -3.79%
Hero Motocorp +9%ONGC -2.27%

Performance of Indices: 

IndicesPerformance
Nifty 503.31%
Nifty Next 502.39%
Nifty 1003.11%
Nifty 2003.04%
Nifty 5003.02%
NSE Midcap 1002.68%
NSE Smallcap 1002.97%
Nifty Alpha 501.91%

RBI Policy on 7th June

On June 7, Reserve Bank Governor Shaktikanta Das announced that the benchmark interest rates would remain unchanged at 6.5%. The MPC, comprising three RBI and three external members, projects real GDP growth at 7.2% and CPI inflation at 4.5% for FY25. Governor Das emphasized the RBI’s commitment to aligning inflation to 4% and noted a favourable inflation growth balance.

European Central Bank Rate Cut

On June 6, 2024, the European Central Bank cut interest rates for the first time in nearly five years, reducing its three key rates by a quarter-point as inflation approached the 2% target. The benchmark deposit rate was lowered from 4% to 3.75%.