Best day in a decade: Markets salute exit polls verdict, hit record highs

The benchmark Sensex and Nifty hit new all-time high on Monday after exit polls showed the ruling Narendra Modi-led Bharatiya Janata Party (BJP) was set to win a second term in the general elections concluded on Sunday.

The Sensex climbed 3.75 per cent, or 1,422 points, to end at 39,353, while the Nifty50 index vaulted 421 points, or 3.7 per cent, to close at 11,828. Both indices surpassed their previous record highs touched on April 16. This is the biggest one-day gain in 10 years in point terms and the most since September 2013 in percentage terms.

Investor sentiment was buoyed by exit polls predicting that the BJP, with the help of its coalition partners, will comfortably reach the majority mark, allaying market fears that a change in regime at the Centre would derail economic reforms.

The benchmark indices had declined 6 per cent after hitting an all-time high last month, partly due to fears that the Congress-led resurgent Opposition would make it challenging for the Modi government to retain power in the wake of agrarian distress and rising unemployment.

“The exit poll outcome is a big sentiment booster. We expect the rally to continue till the final results are out (May 23). Markets could extend the gains even further if the final result mirrors the exit poll projections,” said A Balasubramanian, chief executive officer, Aditya Birla Sun Life Mutual Fund.

In the past three sessions, the Sensex has gained 2,238 points, or 6 per cent, erasing all losses for the month.  

Mahesh Nandurkar, India strategist, CLSA India, said that a strong mandate for the Modi government means concerns on populist steps such as cash transfers and farm loan waivers will probably decline.

Foreign portfolio investors (FPIs) were seen stepping up their buying ahead of the election results. On Monday, they bought shares worth Rs 1,734 crore, even as their domestic counterparts sold shares worth Rs 543 crore. In the previous eight sessions, FPIs had pulled out Rs 8,500 crore from domestic stocks.

Across-the-board buying was seen on Monday, with three stocks advancing for every one declining. 

Beaten-down stocks in the realty, non-banking financial company (NBFC) space, state-owned banking, and even shares of beleaguered groups rallied sharply.

The Nifty PSU Bank index jumped 8 per cent, Nifty Realty index rose 6 per cent, and Bank Nifty index jumped 4.5 per cent to a new all-time high.

Adani Group and Anil Ambani Group shares saw huge gains. Market players said investors were betting that the new government would take steps to ease liquidity pressure faced by realty and NBFCs.

Some, however, cautioned investors from getting swayed by the ongoing election-related euphoria in the market. They said the elections have a short-term bearing on the market.

“After the election dust settles, markets will again start searching for fundamentals such as corporate earnings, oil prices, and how the US-China trade wars pan out,” said Raamdeo Agrawal, co-founder Motilal Oswal Financial Services.

Sonal Varma, managing director and chief India economist at Nomura, said even if the BJP returns to power, “we do not foresee a major reversal of the current (weak) economic conditions in the short term, although the end of political uncertainty and policy continuity would be a medium-term positive.”