Traders in Mumbai started the day with a shock as India began tallying votes from a seven-week election and it became clear that the government of Narendra Modi was not doing nearly as well as expected. By the end of trading on Tuesday, the markets were down 6 percent, nearly wiping out the year’s gains.

India’s stock market had been on a tear, buoyed by economic growth and confidence that Mr. Modi, the most powerful prime minister in generations, was sure to secure a third term in office. Investors looking to India yearn for political stability and many have done especially well during the first 10 years of Mr. Modi’s pro-business leadership. Even after Tuesday’s decline, the blue-chip Nifty 50 index has nearly tripled since Mr. Modi became prime minister.

But the Indian market’s main indexes have entered choppier waters on the way to the election.

Some companies, namely those considered “Modi stocks,” fared especially poorly as the election result came into view. The Adani Group’s fortunes were always the most eye-catching. Gautam Adani rapidly became Asia’s richest man, as his infrastructure-oriented businesses worked in harmony with Mr. Modi’s plans for the country. That is, until a short-seller’s report in early 2023 accused the Adani Group of market manipulation and accounting fraud.

Adani’s stocks crashed, but within a year, as it became clear that the Indian government and many of the world’s biggest banks would be patient with the companies, they climbed back up. On Tuesday, Adani Enterprises, the group’s flagship company, shed 19 percent of its value, putting it halfway between its peak and subsequent trough.

Mr. Modi has anyway won enough seats to form a new government, albeit with a much slimmer majority than forecast. Chris Wood, global head of equity strategy at Jefferies, an investment bank, last year gamed out an even worse result for Mr. Modi, saying during an investor summit in October that if Mr. Modi were suddenly defeated, “I would expect a 25 percent correction if not more.”

Some degree of correction might be welcomed, at least among professional investors. A lot of the market’s recent growth has reflected the influx of small-time local investors buying stocks for the first time.

With global investors clamoring for access to India’s long-term prospects, it had become nearly impossible to find bargains. Christine Phillpotts, portfolio manager for emerging markets at Ariel Investments in Chicago, said India had become “the market that everybody loves to love.” That meant there weren’t many opportunities left, even though she agreed that India’s economy would keep growing robustly.

The other consolation is that, as much as investors need to know which government policies will favor which companies, India’s track record suggests that its economy is capable of growing rapidly under conditions of vigorous, multiparty democracy. Some of the fastest rates it ever clocked were achieved under a previous coalition government, during a growth spurt from 2006 to 2010.

Even Mr. Wood, who anticipated a market decline in response to Mr. Modi’s losing ground, thought that stocks “would bounce back sharply, due to the momentum” of India’s economy as a whole.

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