French elections buoy stock markets

Indian markets saw biggest single-day gain in nearly 6 weeks as centrist Macron was ahead in first round

Indian markets posted their biggest single-day gain in nearly six weeks as investor appetite got a boost after centrist Emmanuel Macron leaped ahead of far-right leader Marine Le Pen in the first round of the French presidential election. Risky assets gained across the globe and safe-haven assets, including gold and bonds, retreated as investors cheered the development. Le Pen’s prospects ahead of the elections were seen as a threat to the euro and geopolitical stability. European markets traded two-four per cent higher.

The Sensex closed at 29,655.8, 290.5 points or one per cent higher. On the other hand, the Nifty gained 98.5 points or 1.1 per cent to close at 9,217.9. The bullishness also extended to broader markets with mid-cap and small-cap indices closing 0.95 per cent and 0.82 per cent respectively.

Market participants say the upward movement of Indian equities on Monday was on account of a “relief rally” as investors globally had curtailed their buying in the last few weeks over concerns about the final outcome of the French elections. 

In the past two weeks, the domestic market came off from its highs amid slowing pace of foreign investment on account of global caution. 

“The results of the first round of the French elections are a relief for the markets as it allays the fears of investors about a Brexit-like fallout. After a long time, global factors are now looking positive. While the Trump administration didn’t undertake any adverse policy decisions so far, growth seems to be coming back in Europe. The only concerns currently are the performance of Chinese economy and geopolitical tensions in Syria,” said Andrew Holland, chief executive officer at Avendus Capital Alternate Strategies.

So far, 2017 has been a positive year for emerging markets (EMs) with all the major indices registering decent gains. In dollar terms, the Sensex has gone up 17.4 per cent while the Kospi (South Korea) and Taiex (Taiwan) gained 14.4 per cent and 12.2 per cent, respectively. On the other hand, the performance of US markets has been flat with all the major benchmarks gaining in the range of two-five per cent.

Global investment firm Franklin Templeton Investment said in a note to investors that the weakness in the US dollar along with absence of any protectionist trade measures from the Trump administration has helped EMs register one of the strongest gains in many years.

“Encouraged by these tailwinds, investors responded by increasing their exposure, pushing investment flows to emerging markets in March to their highest monthly level since the start of 2015,” Templeton said in the report.

Going forward, although global factors would continue to play a key role in deciding the direction of Indian markets, domestic factors, including corporate earnings and play-out of monsoons, would be key triggers for the markets, experts said. 

The major Sensex gainers included state-owned GAIL, which rose 3.17 per cent, followed by Axis Bank, L&T and HDFC Bank, which gained 2.5 per cent each. HDFC Bank and HDFC both touched fresh all-time highs on Monday.

Foreign portfolio investors (FPIs) sold equities worth Rs 279.5 crore, while domestic institutions bought equities worth Rs 978 crore, provisional data from BSE showed.