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India’s Modi will win a historic third term, but with a surprisingly small majority

NEW DELHI: Indian Prime Minister Narendra Modi looked set to retain power at the head of the ruling coalition on Tuesday, but his Hindu nationalist party lost its absolute majority for the first time in a decade as voters defied predictions of another landslide.

The outcome unnerved investors, with stocks plummeting as the new results showed that for the first time since taking power in 2014, Modi will depend on at least three different regional parties whose political loyalties have fluctuated over the years.

Analysts say this could inject some uncertainty into policymaking in the world’s most populous democracy after a decade in which Modi ruled with a strong hand.

Modi’s Bharatiya Janata Party (BJP) won a majority on its own in 2014, ending India’s era of unstable coalition governments, and repeated the feat in 2019.

In his first comments since the counting of votes began, Modi said that for the third time the people had trusted the BJP-led coalition and that it was historic.

“People’s blessings for the third time in 10 years are boosting our morale, giving new strength,” Modi told cheering BJP members at the party headquarters in New Delhi.

“Our opponents, despite being united, could not even win as many seats as the BJP did.”

Promising to work hard and take “big decisions”, Modi listed electronics, semiconductor and defense manufacturing, renewable energy and agriculture sectors as areas of special focus in his third term, without elaborating.

The blue-chip NIFTY 50 and S&P BSE Sensex each fell about 6 percent, posting their steepest poll-day declines since 2004, when the BJP-led coalition lost power, as foreign institutional investors sold a record 124.36 billion rupees ( $1.5 billion) of stock.

It was also the worst session since March 2020 for both blue-chip indices, when markets fell due to lockdown restrictions due to COVID-19. The rupee also fell sharply against the dollar and benchmark bond yields rose.

Markets rallied on Monday after polls for the June 1 election predicted a landslide victory for Modi and the BJP, with the ruling National Democratic Alliance (NDA) expected to get a two-thirds majority and more.

At 16:15 GMT, television channels showed the NDA leading in about 290 of the 543 elected seats in the lower house of parliament, where 272 is the overall majority, with counting nearing completion.

Full results are likely later Tuesday evening.

They showed the BJP holding about 240 seats where the NDA was leading, compared to the 303 seats it won in 2019.

BAD SHOW

Two key regional allies in the NDA have endorsed Modi as the next prime minister, dismissing local media speculation that they may waver in their support or possibly switch sides.
The Telugu Desam Party (TDP) and the Janata Dal (United) have said that their pre-election alliance with the BJP is intact and they will form the next government.

The BJP’s tally is likely to have been dented by the party’s poor showing in the most populous state of Uttar Pradesh, which also sends 80 MPs to Parliament.
The party led with 33 seats in the state, down from the 62 it won there in 2019, with analysts saying tough issues overshadowed the BJP’s appeal to the Hindu majority.

The magnificent temple of the Hindu god-king Lord Ram inaugurated by Modi in January has not boosted the BJP’s fortunes as expected, they said.

The opposition INDIA alliance led by Rahul Gandhi’s centrist Congress party led with more than 230 seats, more than predicted. The Congress alone led with nearly 100 seats, almost double the 52 it won in 2019 — a surprising jump that should strengthen Gandhi’s position.

“The country has unanimously and clearly stated that we do not want Narendra Modi and Amit Shah to be involved in running this country, we do not like the way they are running this country,” Gandhi told reporters, referring to Modi’s strong figure . two, Home Minister Shah. “That’s a huge message.”

Asked whether the opposition would try to form a government, Gandhi said the Congress would hold talks with its allies on Wednesday and decide on future steps.

MARKETS IN PANIC

Investors were buoyed by the prospects of Modi’s new term, expecting him to deliver further years of strong economic growth and corporate reforms, but the winning margin during the count proved a concern.

“The key question is whether the BJP can retain a one-party majority. If not, could her coalition deliver economic development, especially infrastructure?” said Ken Peng, head of investment strategy for Asia at Citi Global Wealth in Singapore.

“There may be more expansionary fiscal policy to bolster social assistance and other local government spending,” he said.

Neelesh Surana, chief investment officer at mutual fund Mirae Asset, said the market had overreacted due to a sense of distrust. “However, despite the ruling, there is likely to be a fundamental continuity in government policies,” he said.

Modi, 73, who first came to power in 2014 on promises of growth and change, was seeking to be only the second prime minister after India’s independence leader Jawaharlal Nehru, who won three consecutive terms.

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