BENGALURU, June 5 (Reuters) - Indian shares were expected to see a muted start on Wednesday after posting their worst day in over four years in the previous session, as a narrow win for Prime Minister Narendra Modi's alliance raised concerns about policy continuity.
The Gift Nifty was trading at 22,050 points as of 7:13 a.m. IST, indicating that the benchmark Nifty 50 will open marginally higher than its Tuesday close of 21,884.50.
According to the country's election commission, Modi's Bharatiya Janata Party won 240 seats, falling short of the 272 seats needed for a simple majority in the 543-member lower house of parliament.
NSE Nifty 50 and S&P BSE Sensex closed nearly 6% lower each on Tuesday as voting trends indicated that Modi's party would have to depend on at least three regional allies to form the government.
The outcome surprised the market as exit polls over the week-end had projected a much bigger margin of victory for the Modi-led National Democratic Alliance.
Foreign institutional investors (FIIs) sold a record 124.36 billion rupees (about $1.5 billion) worth of Indian shares on Tuesday, provisional data from the National Stock Exchange showed on Tuesday.
"In the new scheme of things, we need to assign a lower valuation multiple, to factor in coalition risks and its impact on the reform path," said Amar Ambani, executive director, YES Securities.
Many analysts said that some reforms taken during Modi's second term could face setbacks because of the coalition government and a stronger opposition.
Severe jolt to the BJP in states like Uttar Pradesh, Maharashtra and West Bengal will keep tricky reforms like divestment in state-run companies at bay, said Amnish Aggarwal, Director – Research, Prabhudas Lilladher.
Analysts see public sector companies, state-run banks, defence, infrastructure, capital goods coming under pressure due to uncertainties around reforms, but expect consumption-driven stocks and private banks to do well. (Reporting by Sethuraman NR in Bengaluru; Editing by Varun H K)
