Traders in India's stock markets are turning to illegal election betting platforms for clues to combat the uncertainty facing citizens and markets alike regarding the outcome of a long general election.
Weeks before vote counting set for June 4, stock markets are closely tracking shadow-betting platforms that are flourishing nationwide, with wagers now suggesting the ruling Bharatiya Janata Party (BJP) will win a slimmer majority than expected.
Having reached record highs just before voting began, India's S&P BSE Sensex benchmark has turned volatile as reports of lower turnout and voter fatigue fan doubts about the margin of victory for the ruling party.
The shadow betting market now predicts Prime Minister Narendra Modi's party will win just under 300 of parliament's 543 seats, not the super majority of close to 400 it sought.
The last major opinion poll before the election predicted the BJP and its allies could win three-quarters of the seats in parliament.
Stock market traders are adjusting portfolios accordingly.
Jaimin Patel, a retail investor in the equity market for more than 20 years, said he used the shadow betting market to "keep track of what others are tracking".
The election uncertainty has prompted Patel to lighten his positions in India's small- and mid-cap stocks over the last two weeks.
Foreign investors have withdrawn more than $3 billion from Indian stocks in May, or almost half the inflows in the first four months of 2024, and are hedging their portfolios.
"At the back of the mind, whether you are a foreign or retail investor, you will look at the betting numbers," said Deepak Jasani, head of retail research at HDFC Securities.
"They would want to err on the side of caution and will want to have a look at the betting numbers to validate their expectations."
For information on the latest election odds Patel turns to a network of bookies.
A 48-year-old bookie who works out of a small office in Mumbai, the financial capital, said bets of up to 200 million rupees ($2.4 million) on the BJP's tally of seats had been placed with him.
He declined to be identified, since betting in India is illegal except on horse-racing, and said he was a small player in a massive market.
Estimates of the size of the betting market are not available, but several bookies who operate nationwide see similar trends.
The two-way "at-par" quote in the betting market three weeks ago was that the BJP would win 334 to 338 seats, the bookie said. That meant a payout for bettors if the BJP won fewer than 334 seats or more than 338 seats.
In a sign of odds stacking up against a big BJP win, the two-way quote is down to 294 to 298 seats, he said.
The illegal betting shops set their odds on the basis of unpublished information from journalists working on exit polls, crowds at polling stations and feedback from voters.
Exit polls are set to be released on June 1, when the final phase of voting ends.
In the northwestern desert of Rajasthan is the city of Phalodi, a major betting centre.
While the number of seats the BJP will win is the popular wager, at Phalodi odds are available on several other outcomes such as results in each state or the seats won by each political party, said a bookie there, who declined to be identified.
There is no analytical basis for the quotes emerging from the illegal market, said Amit Sahita, a director at Fincode Advisory Services, a wealth management firm.
"However, investors can't afford to ignore what message it is sending out."
Volatility in India's benchmark indexes has picked up alongside the longer odds on Modi's win.
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