Even after Tuesday’s bloodbath in the stock market, the worst may not be over yet as a weaker mandate for the government could lead to subdued sentiment in the near term until there is some clarity on policy continuity, experts said.While the exit polls had predicted a thumping victory for the BJP-led National Democratic Alliance (NDA), the actual results created panic among investors, as the BJP seemed unable to achieve majority on its own in the 542-seat Lower House.

“This was not the election outcome the market valuations were set up for. India valuations have been expensive for ordinary corporate earnings growth/outlook,” UBS said in a note. The international brokerage said it remains “underweight” on India compared with other emerging markets, saying that some of the assumptions around political stability and policy stability that provided comfort to India’s rich valuations could now come under question.The benchmark Sensex nosedived 4,389.73 points or 5.7% to close at 72,079.05 on Tuesday. The Nifty50 also slipped 1,379.40 points or 5.9% to 21,884.50. This was the lowest level for both the indices in two months after they hit record-high levels a day earlier.

Rajesh Palviya, senior vice-president at Axis Securities, said there could be another 500-points fall in the Nifty on Wednesday in case the final verdict shows the BJP falling short of the majority mark.“BJP standalone not getting a majority puts to risk all the focus which was there earlier on growth, economy, defence and railways. A lot of focus now could be on managing the allies. It is not a question of whether they can form the government, it is the question of how much of mindspace will the leaders have for all this,” said Ambareesh Baliga, independent market analyst.While Baliga does not see the market cracking further, he said it will drift.