The benchmark indices on Friday posted their biggest single-day gain in nearly four months after banking, automobile and consumer goods stocks rallied in anticipation of a favourable poll outcome. Better-than-expected earnings posted by financial companies Bajaj Finance and Bajaj Finserv also buoyed sentiment.
The Sensex rose 537 points, or 1.44 per cent, to close at 37,931, while the Nifty rose 150 points, or 1.33 per cent, to end the day at 11,407 — the biggest gain for both the indices since January 31. The sharp rally comes ahead of exit polls, which will be released on Sunday evening after the seventh and last phase of polling ends.
Experts are hoping for a continuity in the Narendra Modi regime. However, they believe stocks could react positively if the election outcome throws up a stable government anchored by either the Bharatiya Janata Party (BJP) or the Congress. In the absence of a clear trend, investors are bracing for a volatile week ahead as stocks will first react to the exit polls on Monday and later the actual results, which will start trickling in from Thursday morning.
Market participants said certain investors built aggressive positions in the market, presumably betting on a BJP victory.
“The rally could be an indication of the type of results one can expect. Investors seem to be convinced that there will be a regime continuation," said UR Bhat, MD, Dalton Capital Advisors.
Domestic brokerage Axis Direct said a bull-case scenario for the markets would be if a “single party wins with adequate or thumping majority".
Certain players attributed the sharp gains on Friday to short-covering and value buying following sharp declines in the indices this month amid selling by overseas investors.
The benchmark indices came off as much as 5 per cent this month on the back of sustained selling by foreign portfolio investors (FPIs). On Friday, FPIs were net sellers for an eighth day in a row, selling shares worth Rs 1,057 crore.
In the eight sessions, FPIs have pulled out Rs 8,500 crore, while their domestic counterparts have provided a counterbalance by stepping up buying. On Friday, domestic institutional investors bought equities worth Rs 1,809 crore.
Shares of Bajaj Finance rose 6.1 per cent, most among Sensex components, after the consumer loan company’s March quarter net profit surpassed Street expectations. Bajaj Finance’s market capitalisation on an intra-day basis surpassed that of Axis Bank. Hero Motocorp, Maruti Suzuki and Kotak Mahindra Bank were among the dozen Sensex stocks which rose more than 2 per cent on Friday.
Meanwhile, YES Bank shares fell another 2.4 per cent, most among Sensex stocks. Technology and pharma stocks dominated the list of losers. Fifteen of the 19 sectoral indices of the BSE ended with gains led by the auto index, which rose 2.5 per cent.