Foreign institutional investors (FIIs) sold a record 124.36 billion rupees (about $1.5 billion) worth of Indian shares, as NSE Nifty 50 and S&P BSE Sensex logged their worst day in more than four years, provisional data from the National Stock Exchange showed on Tuesday.

Both the benchmark indexes dropped about 6% each on concerns about policy continuity against the backdrop of Prime Narendra Modi's alliance heading for a narrow majority in the country's 543-member parliament.

This was the worst session since March 2020 for both the blue-chip indexes, when markets tanked due to COVID-19 lockdown restrictions.

FII selling surpassed the previous high of 105.78 billion rupees of outflows on Jan. 17, 2024.

India's ruling Bharatiya Janata Party-led National Democratic Alliance (NDA) is shown to be ahead in 292 of the total 543 seats in the lower house of the parliament.

While the figure is higher than the threshold of 272 seats required to form the government, it is well below the expectation of 400+ seats that the BJP had set itself.

The NDA's seat tally, as of now, with votes still being counted, is also well below the opinion and exit poll projections, which had estimated a two-thirds majority.

"There is a bit of uncertainty as investors are concerned about the slowdown of reforms that had been initiated under the BJP-led government," said Vinit Sambre, head of equities at DSP Mutual Fund.

"The uncertainty triggered a correction in the markets as investors reassess the outlook under the new political landscape," Sambre said.

Domestic institutional investors (DIIs), who have cushioned foreign outflows in the recent past, also turned sellers, dumping shares worth 33.19 billion rupees, their worst in nearly two months.

($1 = 83.5410 Indian rupees)

(Reporting by Bharath Rajeswaran in Mumbai; Editing by Ravi Prakash Kumar)