(Updates at 2:45 p.m. IST)

By Sethuraman N R

BENGALURU, June 4 (Reuters) - Indian shares posted their

worst session in more than four years on Tuesday, as voting

trends showed Prime Minister Narendra Modi's alliance falling

short of a predicted landslide victory.

While the Modi-led National Democratic Alliance will still

likely form the government, analysts said the Bharatiya Janata

Party winning fewer seats could prevent the government from

pursuing an aggressive reform agenda.

The NSE Nifty 50 index was down 5.3% at 22,024

points as of 2:45 p.m. IST, and the S&P BSE Sensex fell

5.2% to 72,443.

The indexes fell as much as 8.5% earlier in the day, after

hitting record highs on Monday.

The volatility index jumped to its highest since

Feb. 2022 at 31.71.

"Markets were at an all-time high, a lot of hope was built

up (on BJP's majority) and this will unwind over the next few

sessions, said Mayuresh Joshi, head- equity research India at

William O'Neil and Company.

"The focus will turn to policy announcements as the reforms

will any way continue with BJP getting an absolute mandate,"

Joshi said.

TV channels showed the ruling National Democratic Alliance

was ahead in nearly 293 seats, while the coalition of opposition

parties led by the Congress was ahead in more than 220 seats.

272 seats is the minimum needed for a simple majority in the

543-member lower house of parliament.

Traders said that selling by high-frequency traders

accelerated the drop and the sharp fall triggered margin calls.

The market is witnessing a significant correction due to

margin calls as retail investors were carrying heavily leveraged

positions, said Rupak De, Senior Technical Analyst, LKP

Securities.

Fresh short positions being built-up is also added to

volatility, said Aniket Nerkar, founder alphastrat, a firm

specialising in trading and investment strategies of

derivatives.

All sectors except consumer goods were in the red.

Banks fell 7.5%, realty dropped

9.4%, infrastructure declined 10.2%, while oil and

gas stocks slumped 11.7% and state-run companies

and public-sector banks tumbled 19% and

18%, respectively.

The small-cap and mid-cap were

trading nearly 8% lower each.

State-run companies saw their worst day ever, while banks,

finance, infrastructure, realty, energy and mid-cap stocks saw

their worst session since March 2020.

Adani Enterprises and Adani Ports sank

18% and 19% respectively, and were the worst losers among Nifty

50 stocks. Other Adani group stocks were down between 9%-18%.

The group stocks had jumped between 4%-18% on Monday after

the exit polls.