Indian Prime Minister Narendra Modi was set to meet his allies on Wednesday to discuss forming the government, a day after his Hindu nationalist party lost its outright majority in parliament in a surprise election verdict.

Modi’s Bharatiya Janata Party (BJP) won 240 seats on its own in the general election, 32 short of the halfway mark in the 543-member decision-making lower house, according to official results announced late on Tuesday.

The outcome unnerved investors, with stocks falling steeply on Tuesday, since Modi would have to depend on disparate regional parties whose political loyalties have wavered over the years.

The National Democratic Alliance (NDA) led by the BJP won 293 seats, more than 20 ahead of the 272 needed to form a government.

The opposition INDIA alliance led by Rahul Gandhi’s centrist Congress party won 230 seats, more than forecast. Congress alone won 99, almost double the 52 it won in 2019 - a surprise jump that is expected to boost Gandhi's standing.

The INDIA alliance was also expected to meet on Wednesday in New Delhi, and discuss a future course of action.

But any efforts at government formation by the opposition were likely stymied by two of the BJP’s key allies endorsing Modi and saying their pre-poll alliance with the party was intact.

Addressing a crowd of cheering party workers at the party headquarters late on Tuesday evening, Modi promised to work harder in his third term.

“The blessings of the people for the third time after 10 years boosts our morale, gives new strength,” he said.

TURNOUT TROUBLE

Modi was seeking one of India’s biggest mandates in the six-week-long election after most opinion polls conducted before voting began had predicted a big victory for him, driven by his personal popularity, free cereal for the poor, new roads and bridges, and his courting of majority Hindus.

But a fall in voter turnout in the first stage of the seven- phase election worried the BJP, several party officials said. A pollster, who declined to be named citing private conversations, said he got calls from “panicked” BJP officials asking if “something was going wrong. Why aren’t people coming?”.

At the same time, some analysts told TV debates that opposition attempts to woo the masses with promises of affirmative action, bigger handouts and more jobs were gaining traction.

That is when Modi changed tack.

Having earlier focused on economic development, India's image and such issues, he switched back to accusing the opposition of favouring minority Muslims at the cost of Hindus.

“I believe that the polarising campaign that the prime minister ran this time, the kind of, you know, hyped-up media outreach that he did, I think these were all signs that he was worried,” said political commentator Arati Jerath.

The BJP said Modi was their best bet to put their message across.

“We discussed internally how our work, economic development, India’s global image and such things sometimes do not set the narrative,” said spokesperson Agarwal.

“The politics is such that other things dictate the narrative, and the BJP must also respond accordingly. For our narrative to work, the prime minister is the best communicator.”

However, with the BJP falling short of a majority on its own, its promises like a uniform civil code for all religions, opposed by some Muslims, and simultaneous state and national elections, will likely be put on the back burner. They could be replaced by policies aimed at more bread-and-butter issues as its allies could demand.

“Modi has seemingly lost his aura of electoral invincibility,” said Michael Kugelman, director of the Washington-based Wilson Center's South Asia Institute think tank.

“He remains highly popular, and his party likely would have done even worse if he weren’t leading it. This is a leader who has repeatedly bounced back from political and policy setbacks and retained large public mandates. With the results we’re seeing today, that narrative of resilience has been dealt a big blow.”