The Indian rupee bore the brunt of market volatility on Tuesday, tumbling against the US dollar after vote counting trends indicated that Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP)-led alliance securing a narrower majority in the national elections than anticipated.
The rupee closed at 83.53 against the greenback, down 0.47 per cent on the day, marking its worst single-day percentage decline since February last year. The fall prompted suspected intervention by the Reserve Bank of India (RBI), with state-run banks reportedly spotted offering dollars near the 83.50 levels, likely on behalf of the central bank.
The rupee’s slump came as a direct reaction to the election outcome, which fell short of the landslide victory predicted for PM Modi’s BJP in exit polls. While the BJP-led alliance is anticipated to secure a parliamentary majority as counting ends, the party itself has clearly failed to achieve an outright majority, data from the Election Commission of India showed.
Market participants expressed concerns that a slimmer mandate for the Modi-led alliance could hamper the undertaking of further economic reforms, a key agenda during the previous administration.
While the rupee bore the brunt of the market turmoil, Indian equity indices also plunged, with the Nifty 50 Index recording its worst day in over four years. Bond yields rose as well, reflecting investor jitters over the election outcome’s potential implications for the country’s economic trajectory.
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