Equity markets likely to extend gains on BJP's Assembly poll wins

The BJP decisively won three out of the four key states-- Madhya Pradesh, Rajasthan, and Chhattisgarh

The domestic equity markets are expected to extend gains following the strong showing of the Narendra Modi-led Bharatiya Janata Party (BJP) in the state elections — a crucial precursor to the general elections in May.

The BJP decisively secured victories in three of the four key states — Madhya Pradesh, Rajasthan, and Chhattisgarh. While the battles in these three states were closely contested, the scale of the BJP’s triumph has surprised many, heightening expectations for regime continuity in 2024 — a positive catalyst for the markets.

“The market will perceive the election results positively due to the unexpected three-state win. While there was anticipation of a BJP victory, the extent of winning three states exceeded Street expectations. The initial reaction typically involves expressions of disappointment or excitement, followed by a return to fundamentals and global market dynamics. With positive global indicators, the momentum is likely to continue. We anticipate a Santa Claus rally, which now has more legs,” said Andrew Holland, chief executive officer, Avendus Capital Public Markets Alternate Strategies.

Last week, the benchmark S&P BSE Sensex and the National Stock Exchange (NSE) Nifty recorded their biggest weekly advances in five months. On Friday, the Nifty surpassed its previous record high from September.

“With the ruling party securing wins in three states, we see celebratory market activity. However, this optimism may be short-lived, and market trends will once again be guided by global developments,” noted Ambareesh Baliga, an independent equity analyst.

On Friday, the Nifty closed at 20,268, surpassing its previous closing high of 20,192 on September 15. The Sensex concluded at 67,481, slightly below its record closing high of 67,839, also recorded on September 15.

Additionally, the market capitalisation of NSE-listed companies exceeded the $4 trillion mark for the first time on Friday, reaching Rs 334.7 trillion ($4.02 trillion).

Global markets registered their biggest monthly gain in three years in November, propelled by a sharp decline in US bond yields. Investors are betting that the US Federal Reserve has concluded its interest rate hikes and will soon begin lowering rates.