Traders in India’s stock market are turning to illegal election betting platforms for clues to combat the uncertainty regarding the outcome of the ongoing general elections, reported news agency Reuters.
According to the report, in the weeks leading up to the vote counting on June 4, the market has been keenly observing the trends on shadow-betting platforms, which have become widespread across the country. These platforms, where individuals place informal bets on political outcomes, indicate that the ruling Bharatiya Janata Party (BJP) is anticipated to secure a narrower majority than initially predicted, it said.
In the run-up to vote counting on June 4, India’s S&P BSE Sensex experienced volatility after hitting record highs before voting commenced. Concerns over lower voter turnout and voter fatigue have raised doubts about the margin of victory for the ruling Bharatiya Janata Party.
Shadow betting markets, which have gained prominence nationwide, now predict that Prime Minister Narendra Modi’s BJP will secure just under 300 of the 543 parliamentary seats, highlighted the report. This is a significant decrease from the near 400 seats the party initially aimed for. The last major opinion poll before the election had forecasted that the BJP and its allies could win about three-quarters of the seats in parliament, Reuters noted.
In response to these developments, stock market traders are adjusting their portfolios. Jaimin Patel, a seasoned retail investor, relies on shadow betting markets to gauge broader investor sentiment. Due to the election uncertainty, Patel has reduced his holdings in India’s small- and mid-cap stocks over the past two weeks, Reuters informed.
Foreign investors have also reacted, withdrawing over $3 billion from Indian stocks in May, which is nearly half of the inflows seen in the first four months of 2024, it further noted, adding they are now hedging their portfolios to manage risks. Deepak Jasani, head of retail research at HDFC Securities, told the news agency that both foreign and retail investors pay attention to betting numbers as a measure to validate their expectations and to exercise caution.
For the latest election odds, Patel turns to a network of bookies. One such bookie in Mumbai revealed that bets totaling up to ₹20 crore ($2.4 million) on the BJP’s seat count had been placed with him, emphasising the massive, albeit illegal, betting market in India. The initial “at-par” quote three weeks ago suggested that the BJP would win 334 to 338 seats. Now, reflecting diminished expectations, the quote has dropped to 294 to 298 seats, observed Reuters.
These betting odds are influenced by unpublished information from journalists, polling station activity, and voter feedback, noted Reuters. Exit polls are scheduled to be released on June 1, coinciding with the end of the final voting phase.
In Phalodi, a significant betting hub in Rajasthan, bets are being placed not only on the total number of seats the BJP will win but also on various other outcomes, including state-by-state results and individual party performances, said the report.
Amit Sahita, director at Fincode Advisory Services, told Reuters that while the quotes from the illegal market lack analytical rigor, their message cannot be ignored by investors.
As a result of these changing odds and predictions, volatility in India’s benchmark indexes has increased, reflecting the growing uncertainty surrounding the election outcome, it added.
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Published: 22 May 2024, 12:12 PM IST
