(Updates at 12:41 p.m IST)

By Sethuraman N R

BENGALURU, June 4 (Reuters) - Indian shares plunged over

8% on Tuesday, set for their worst day in four years and erasing

their gains for 2024, as vote-counting trends showed Prime

Minister Narendra Modi's alliance falling short of a predicted

landslide victory.

The NSE Nifty 50 index was down 7.2% at 21,605

points as of 12:41 p.m. IST, and the S&P BSE Sensex

fell 6.6% to 71,366.

The indexes fell as much as 8.5%, poised for their worst

session since the onset of the COVID-19 pandemic. They had

jumped over 3% on Monday after exit polls projected that the

BJP-led alliance will likely get a two-thirds majority in the

lower house.

With the day's losses, the benchmarks are down nearly 1% so

far this year.

TV channels showed the ruling National Democratic Alliance

was ahead in nearly 300 seats. 272 seats is the minimum needed

for a simple majority in the 543-member lower house of

parliament.

The volatility index jumped to its highest since

Feb 2022 at 31.71, after easing on Monday.

"Since exit polls were at an extreme, anything that doesn't

point to more strength is obviously a negative," said Anand

James, chief market strategist at Geojit Financial.

"Despite exit polls giving a resounding victory for the

ruling party, markets volatility gauge did not go down below 20,

as it was pricing in an outlier," James said.

The longs added recently by the foreign investors after the

exit polls may have come under pressure, he added.

All sectors were in the red. Banks fell 7.9%,

realty dropped 9.3%, infrastructure

declined 13%, while oil and gas stocks lost 11.7%

and state-run companies and public-sector banks

retreated 19% and 18%, respectively.

The small-cap and mid-cap were

trading down 12.4% and 11.3%.

Adani Enterprises and Adani Ports lead

losses with a 25% fall each in Nifty 50 index. Other Adani group

stocks were down between 9%-20%.

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

the exit polls.

"The fear of the market is whether present numbers will stay

or will reduce further. (Even at current majority) there will be

some element of disappointment as they are below market

expectations," said Mayuresh Joshi, head- equity research India

at William O'Neil and Company.

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

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

sessions and the focus will turn to policy announcements as the

reforms will any way continue with BJP getting an absolute

mandate," Joshi said.

(Reporting by Sethuraman NR in Bengaluru; Editing by Varun H K)