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The benchmark indices for the BSE and the National Stock Exchange touched record highs on Friday, as market participants stepped up bets on expectations a stable government coming to power when election results are declared next Friday.
The S&P BSE Sensex was up 650.19 points or 2.91% to close at 22,994.23, after touching an intra-day high of 23048.49. The NSE's CNX Nifty index closed at 6,858.80; also an all-time high.
The value of trades executed on Friday was more than twice the average of the previous two weeks. Turnover was Rs.1.78 lakh crore, compared to Rs.90373 crore in the last fortnight. Investor wealth has risen by Rs.1.99 lakh crore since the beginning of the elections. Total market capitalization has risen from Rs.75.54 lakh crore to Rs.77.54 lakh crore.
"The rally has been on the back of expectation of a stable government and is likely to continue. Foreign institutional inflows are also expected to be strong," said Nirmal Jain, chairman of India Infoline.
"People seem to be getting optimistic ahead of the election results. There are expectations that problem sectors are turning around, and sectors like banking are sensitive to how the economy is doing," said Andrew Holland, chief executive officer of Ambit Investment Advisors Private Limited.
Ten out of the BSE's twelve sectoral indices closed in the green. The BSE's banking index was the best performing one, up 5.34%. It closed at 15721.36, its highest close since May last year. Indices tracking the real estate and power sectors were up over 4.38% and 4.12% respectively.
The consumer durables and healthcare indices were the only ones to end with losses. They were down 0.03% and 0.56% respectively.
There were nearly three advances for every two stocks which ended with losses on the BSE. The top five stocks contributed to the majority of the gains on the Sensex. ICICI Bank, HDFC Bank, Reliance Industries, HDFC and Larsen and Toubro contributing 400 points to the surge in the benchmark index. This was the highest close for the Sensex and the Nifty since 23rd April, when the indices closed at 22876.54 and 6840.8 respectively.
Dealing room buzz suggested that leaked exit poll data pointed to a landslide victory to one of the parties, triggering the rally on Friday.
The rise came even as global cues remained muted. European markets were trading in the red at the time of writing. All other Asian had less than 1% gains, except for Philippines, which was up 1.21%.
Ramesh Damani, member, BSE said that this may be part of a larger upside trend in the market.
"Rather than attributing it to hopes of an NDA victory, which is probably partly true; this is also in the nature of how equities behave in the early phase of a bull market. The market may do nothing for a few days and then wipe out multiple days of losses in a single day," he said.
"There is a fear that tech and pharma will be affected by the depreciation in the rupee, and there are expectations of an investment cycle revival," Damani added.
Sun Pharmaceutical Industries, Tata Consultancy Services and Dr.Reddy's Laboratories were the only Sensex stocks to ende marginally in the red, down less than one%. ICICI Bank was the best performing of the thirty stocks that make up the Sensex. It gained 6.63% to close at Rs.1374.85.
Provisional exchange figures showed that foreign institutional investors were net buyers by Rs.1268.78 crore. Domestic institutions were net sellers by Rs.75.3 crore.
The NSE's volatility index, India VIX, was up 9.93% to close at 37.7. This was its highest close since 25th August 2009.
