Indian Voters Surprise Modi's Party, Stock Markets Plunge with Lower Share Than Predicted

In a surprising turn of events, Indian voters delivered unexpected results for Prime Minister Narendra Modi's party, causing stock markets to plummet below anticipated levels. This outcome has also potentially delayed the enactment of cryptocurrency regulations.

Modi's Bharatiya Janata Party (BJP) and its allies appear set to reclaim authority, despite falling short of the projected supermajority of 370 seats in India's 543-seat lower parliamentary chamber.

The BJP failed to secure the 272 seats required to reach the halfway mark, a task it accomplished effortlessly in 2019. This outcome grants significant power to its supporters, leaving room for the opposition, led by the Indian National Congress, to lure them into defection.

Although exit polls on June 1 foresaw a clear victory for the BJP and its coalition partners, India's stock markets, initially soaring to record highs, witnessed a sharp decline of approximately $350 billion as the election results unfolded. The Nifty and Sensex indices plummeted by as much as 8.5% before experiencing a partial recovery.

Rajagopal Menon, the Vice President of the Indian cryptocurrency exchange WazirX, expressed, "The election results constituted a genuine black swan event that took everyone by surprise. In the short term, market volatility is expected due to the aversion to instability. Once the new government assumes office, stability should be restored."

Voters showed little interest in cryptocurrency, as it did not feature prominently in political discourse during the campaign. Consequently, the election outcome is unlikely to have an immediate impact on crypto policy, with existing stringent regulations such as a 1% tax deduction on all crypto transactions anticipated to persist.

During its presidency of the Group of 20 nations last year, the Modi administration prioritized the formulation of crypto regulations in alignment with international consensus.

The agenda for comprehensive crypto legislation may face delays as the administration focuses on strengthening its coalition and addressing the policy concerns of its partners. The potential transition of Nirmala Sitharaman, the current Finance Minister, from her position could influence crypto-related directives.

Menon affirmed that there have been no significant revisions to crypto regulations thus far. India signed the G20 ministerial declaration, committing to a detailed regulatory framework by 2025.