PM Narendra Modi trailer runs to full houses on D-Street

The exit polls predicted an emphatic victory for the BJP in the general election.

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Brokerages see upbeat sentiment being sustained beyond Thursday if the exit polls are confirmed.
Mumbai: Indian stocks shot up on Monday after exit polls the previous day predicted the Bharatiya Janata Party-led coalition will return to power for a second term. Sensex and Nifty posted their best oneday gain in nearly six years to end at record closing highs. The rupee strengthened more than 1 per cent and bond prices rose.

The Sensex jumped 1,422 points, or 3.75 per cent, to close at 39,352.67 while the Nifty rose 421 points, or 3.7 per cent, to end at 11,828.25 — the highest percentage gain since September 10, 2013. In absolute terms, this was the biggest single-day rise for the benchmark indices in 10 years.

The exit polls predicted an emphatic victory for the BJP in the general election, easing market concerns of a loosely knit coalition taking over. That resulted in the fear gauge, the Volatility Index or VIX, dropping 16.7 per cent to 23.4, its biggest single-day fall since February 2017. Actual results, following vote counting on May 23, will determine whether the current market strength is sustained, along with factors such as US-China trade talks and foreign portfolio flows, said analysts.

While both the Sensex and Nifty ended within touching distance of intraday records, the Bank Nifty scaled a new all-time high before ending up 4.4 per cent — its best one-day performance in over two years.

Indices likely to touch new peaks before May 23

The BSE MidCap and SmallCap indices gained 3.6 per cent each, marking their best day since October last year.

The two main benchmarks are expected to stay buoyant and touch new peaks in the runup to the outcome of the national polls on Thursday.

“The extent of win predicted by the exit polls implies that BJP will see a strong victory. My guess is that the exit polls will get it right,” said Raamdeo Agrawal, joint managing director at Motilal Oswal Financial Services.

The rupee strengthened 1.2 per cent to hit an intraday high of 69.36 to the dollar before ending at 69.74 versus 70.22 at the close on Friday. Overseas flows could bolster the Indian currency further, shielding it from global uncertainty, experts said. The benchmark bond yield dipped seven basis points, pushing prices up. It closed at 7.29 per cent against 7.36 per cent on Friday. One basis point is 0.01 percentage point.

All sector indices on the NSE ended in the green, up 0.7-8 per cent. Market breadth was heavily in favour of advances, with 2,019 stocks gaining on the BSE compared with 609 declining. Forty-five of the 50 Nifty constituents ended up, with Adani Ports, Indiabulls Housing, IndusInd Bank, SBI and Tata Motors gaining 7-10 per cent. Foreign portfolio investors (FPIs) turned net buyers after a gap of eight sessions on Monday, with net equity purchases of ?1,730 crore, according to provisional data. Domestic institutional investors (DIIs) sold local shares worth a net ?543 crore.

Exit polls released Sunday evening showed BJP-led National Democratic Alliance (NDA) could win between 267 and 350 seats in the 543-seat Lok Sabha, repeating the landslide victory of 2014. The NDA needs 272 seats to form a government. The United Progressive Alliance (UPA) led by the Congress party is estimated to win 82-132 seats.

“There was a fear in the market earlier whether there will be an unwieldy coalition government. If there is a stable government after May 23, it will be good for the market,” said Pratik Gupta, head, Deutsche Equities India.

A win by the NDA could help the markets reverse the otherwise bearish trend seen this month till Friday. The Sensex and Nifty are up 0.8 per cent and 0.7 per cent, respectively, in May after Monday’s surge. Till Friday’s session, they were down nearly 3 per cent for May and FPIs had offloaded nearly ?5,000 crore of Indian shares. This was largely precipitated by escalating US-China trade tensions, a surge in oil prices and fear that the slowdown in India’s rural economy could hurt the BJP’s poll prospects. All these factors had dented the 9 per cent rally in Indian equities that took place between March and April, thanks to the government’s perceived tough stance against Pakistan following the Pulwama terror attack, which was seen as improving its poll standing. The Nifty and Sensex touched records of 11,856.15 and 39,487.45 points, respectively, on April 18.

Brokerages see upbeat sentiment being sustained beyond Thursday if the exit polls are confirmed.

However, some experts expect profit booking in the wake of Monday’s exuberance. Also, if exit polls turn out to be off the mark and the result is a weak coalition led by NDA or a non-NDA government, the markets could correct sharply, experts said. Exit polls had largely predicted the 2014 elections correctly but went wrong in 2004 and 2009.

“If and when the results are confirmed in line with the exit polls, I would expect some profit taking. This would be trading actions undertaken strictly by investors, who trade events, such as elections, on a tactical basis,” said London-based Jan Dehn, head of research at Ashmore Group. “However, there is every reason to believe Indian markets will soon be able to stage further gains provided that the government uses its mandate to continue to reform.”

The new government and the market will have harsh economic and financial realities to deal with, in particular rural distress and liquidity crisis that has hit nonbanking finance companies (NBFCs).





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