Stock markets in India are coming to terms with the impending economic stress even as the initial euphoria over expectations that the BJP will storm back to power is evaporating. Experts say the markets are trying to figure out how the new government will steer ahead with its Budget in June in the wake of lower tax collections, mixed corporate profits and GDP numbers that may be put to test due to faulty data analysis.

The Sensex and the Nifty, the two key stock indices that ran up to new highs soon after the Election Commission announced the polling dates in March, seem to have been rattled by reality both on global and domestic fronts this month. On Wednesday, the Sensex and Nifty fell by 1.27 per cent and 1.2 per cent, respectively, after it was reported that the GDP numbers are questionable and may have to be revised down.

Reportedly, the National Sample Survey Office (NSSO) has found that 36 per cent of the companies taken into account for calculation of new GDP numbers are either untraceable or had been categorised wrongly. There is a high probability that the country’s growth figures will decline if these “ghost” companies are removed from the data set. The Sensex plunged 487.50 points to end at 37,789 and the Nifty fell 138.45 points to close at 11,359.

Just last week, there were reports that there could be a whopping shortfall of ₹82,000 crore in direct tax collections due to lower corporate tax mop-up. Mixed corporate results and caution ahead of the poll results on on May 23 had impacted sentiments too, market experts say.

“The recent news on economic and corporate fronts has been negative and uninspiring. The huge slip-up in tax collection will put the Budget of the new government under huge stress,” said G Devanathan, Managing Partner, Riverstone Capital.

But not everyone agrees with this view, particularly those fund managers tracking the market technicals.

“In the near term, the markets look oversold and a bounce back could be on the cards,” said Rohit Srivastava, fund manager, Sharekhan-BNP Paribas. “A narrative that corporate earnings had slowed down, tax collections could be lower and GDP figures are questionable has been doing the rounds for several months. But it is getting accentuated only now as the Sensex is falling. These talks will again die down if the markets reverse their course.”

Foreign institutional investors have pumped in more than ₹60,000 crore into stocks this year. But the pace had slowed down in the past couple of weeks as indices touched new highs and bad news started pouring in.

Global indices fall too

On the global front, an announcement by US President Donald Trump that talks with China are falling apart rattled markets. China’s key benchmark index — the Shanghai Composite — is down nearly 7 per cent in two days.

Key indices in the US — the Dow Jones Industrial Average, the S&P 500 and Nasdaq — too fell more than one per cent on Tuesday.