The benchmark Sensex rose 724 points or 1.8 per cent to end at 41,340, while the Nifty climbed 212 points, or 1.8 per cent, to end at 12,120. Both indices ended at their highest close since February 19. In intra-day trade, their year-to-date returns moved into positive territory. Most global markets also rallied around two per cent as the US election trends spurred bullish bets.
Ahead of the elections, investors were betting on a “blue wave” trade —Democrats sweeping both the White House and Congress. However, a split Congress is now being looked at even more positively as Republicans in the upper house would be able to block socialist agenda such as increase in taxation or health care spends and tighter financial regulations, said experts.
The election trends on Thursday showed Democratic candidate Joseph Biden as the likely winner of the US presidential election and Democrats and Republicans were to retain their control on US House of Representatives and Senate. Analysts said Biden’s victory would benefit emerging markets (EMs) as it will reduce geopolitical uncertainty, particularly trade tensions with China. A less confrontational approach towards China could shore up investor sentiment toward export-dependent economies and companies in Asia, including Indian software exporters, said analysts. The NSE IT index gained 1.3 per cent.
“A Biden presidency will ensure less aggressive stance towards China. This will lead to more fund flows towards China, and India will get some of that flows. And with Republican centred Senate, some of the concerns of the market like tax raises will not happen in the near term. The only flipside will be a toned-down stimulus package,” said Andrew Holland, CEO Avendus Capital Alternate Strategies.
Investors who were hoping for a huge stimulus have now held on to hopes that monetary easing will continue albeit at a reduced pace. Moreover, the stimulus will be less debt-dependent, which will keep the US rates low, which would help maintain flows into EMs, said analysts.
Overseas investors bought shares worth about Rs 5,400 crore — the most in three months. Domestic investors took advantage of the gains and net-sold shares worth Rs 2,208 crore — highest in nearly a year.
“Every large central bank globally, including the Indian central bank, has made it clear that over the next 12 months to 24 months the monetary policy will be benign. The real interest rate in very large economy will be zero or negative, and that’s positive for equities,” said Saurabh Mukhherjea, founder, Marcellus Investments. The Indian markets have been on an upswing this week amid signs of revival in the economy.
“The unlock process has led to the normalisation of the economy. If you look at the GST collections or any other metric, we are almost back to the level we were a year ago. From now on provided this rally will continue if the new US President does not say anything drastically negative about the global trade and emerging markets,” said Mukherjea.
All the Sensex components ended the session with gains. Overall, market breadth was positive with total advancing stocks at 1,737 and those declining at 912 on the BSE. SBI was the best-performing Sensex stock. The state-owned lender gained 5.6 per cent as analysts raised price targets post better-than-expected September quarter earnings. Tata Steel and IndusInd Bank rose 5.3 per cent each. Barring one, all BSE sectoral indices ended session with gains. Metal and oil and gas stocks gained the most, and their gauges rose 4.4 per cent and 3.2 per cent, respectively.