Indian equity benchmarks witnessed a sharp selloff on Tuesday, with shares plummeting by as much as 8 per cent, marking the steepest intraday decline since the onset of the COVID-19 pandemic. The drastic fall came as early vote-counting trends indicated that Prime Minister Narendra Modi's alliance might fall short of the expected landslide victory.

The NSE Nifty 50 index dropped as much as 7.66 per cent to hit an intraday low of 21,481 and the S&P BSE Sensex nosedived 7.4 per cent to 71,807, wiping out all gains made on Monday following exit polls that suggested a two-thirds majority for the BJP-led alliance.

The volatility index surged to its highest level since March 2022, reaching 29.79, after a slight decrease on Monday.

Anand James, Geojit Financial's chief market strategist, commented, "Since exit polls were at an extreme, anything that doesn't point to more strength is obviously a negative."

The market downturn affected all sectors, with bank stocks, realty, infrastructure, oil and gas, and state-run companies experiencing significant declines. Adani Enterprises and Adani Ports were among the top losers in the Nifty 50 index, each falling by 19 per cent.

Mayuresh Joshi, head of equity research India at William O’Neil and Company, remarked, "The fear of the market is whether present numbers will stay or will reduce further. (Even at current majority) there will be some element of disappointment as they are below market expectations."

He added, "Markets were at an all-time high, a lot of hope was built up (on BJP's majority) and these will unwind over the next few sessions and the focus will turn to policy announcements as the reforms will any way continue with BJP getting an absolute mandate."

(With Reuters inputs)