Jefferies warns 25% drop in stock market possible if BJP loses Lok Sabha elections

Investors brace as Jefferies predicts a 25% stock market plunge in India if the Bharatiya Janata Party (BJP) fails to secure victory in the upcoming national elections, echoing the historical market shock of 2004. Chris Wood, Jefferies LLC's global head of equity strategy, voiced his concerns at a Mumbai event, citing potential repercussions for India's robust growth trajectory.

Despite reforms like output-linked incentives that have attracted global investments, Wood warned of a significant market correction if the BJP experiences an unexpected defeat. However, he expressed confidence in India's long-term potential, considering it the "best growth story in the world," especially amid challenges faced by China.

In 2004, India experienced a 20% stock market plunge over two days following the BJP-led government's surprise electoral loss. The markets partially recovered after the Congress party-led coalition government reassured investors about maintaining policies aimed at opening up the nation's economy.

Wood emphasized that while corrections might occur, India's momentum and growth prospects would likely facilitate a market rebound. He highlighted the country's attractiveness to investors, emphasizing the resilience of India's growth story amid global economic uncertainties.

Investors are closely monitoring the political landscape, aware that the election outcome could significantly impact India's financial markets. As the nation prepares for the elections, market participants remain watchful, seeking stability and assurance in the face of potential political shifts.

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