Firmness continued on the bourses in morning trade, with the market sentiment boosted by various exit polls on Monday, 12 May 2014, showing that the Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) will be able to form the next government at the Centre by winning 272 or more seats or will bag just few seats lower than the majority 272 seats needed to form the next government in a house of 543. The barometer index, the S&P BSE Sensex, was up 283.65 points or 1.2%, up about 105 points from the day's low and off close to 85 points from the day's high. The market breadth, indicating the overall health of the market, was strong. The BSE Mid-Cap and BSE Small-Cap indices were up more than 1.5% each, with both these indices outperforming the Sensex. The market sentiment was also boosted by data showing that foreign funds made substantial purchases of Indian stocks on Monday, 12 May 2014. Gains in Asian stocks also underpinned sentiment on domestic bourses.
The exit polls were out on Monday, 12 May 2014, evening after the 9th and the final phase of Lok Sabha elections got over at 18:00 IST on that day. If exit polls prove correct, NDA's prime ministerial candidate Narendra Modi will become India's next Prime Minister. The counting of votes will take place on Friday, 16 May 2014, and the results are expected on the same day. The term of the current Lok Sabha expires on 1 June and the new House has to be constituted by 31 May.
Modi, the prime ministerial candidate from the NDA, is perceived as being more business-friendly and decisive by the business community. As chief minister for the fast-growing state of Gujarat, Modi has built a reputation for getting things done. While campaigning for the Lok Sabha elections, Modi has pledged to reinvigorate the country's manufacturing sector, create more jobs and overhaul the country's inadequate infrastructure. Investors are hoping that the BJP-led government will be better at getting things done and more business-friendly than the current Congress-party-led coalition government.
Various post-poll surveys on Monday predicted an easy win for NDA with CNN-IBN forecasting about 280 seats, Headlines Today 272 seats, India TV 289 seats, ABP 281 and News 24 predicting up to 340 seats for NDA in a house of 543. The predictions of an NDA victory are primarily based on survey results showing BJP and its allies doing exceedingly well in Uttar Pradesh, Bihar and Maharashtra, which account for 168 seats and also in BJP's strongholds of Gujarat, Madhya Pradesh, Rajasthan and Chhattisgarh. Only Times NOW gave NDA cause for worry by not predicting a simple majority. It gave BJP and its allies 249-265 seats, still putting NDA in a comfortable zone, requiring just 20 or so seats from post-poll allies.
CNN-IBN said its post-poll survey is based on the data of the first 8 rounds of polling. In the ninth and the last round on 12 Monday 2014, 41 seats in Bihar, West Bengal and Uttar Pradesh went to polls.
Investors are hoping that when the results of the Lok Sabha elections are out on Friday, 16 May 2014, a stable government which will complete its full term of five years in office comes to power. A party or a pre-poll alliance will need 272 MPs to form government at the Centre, which is a simple majority in 543-member Lok Sabha. Investors are expecting measures for revival of the economy, business-friendly policies and good governance from the new government that comes to power after the elections. Investors expect policy measures from the new government to put India on a high-growth path on a sustainable basis.
The BJP in its Lok Sabha polls manifesto has promised more business-friendly policies if the party comes to power after elections. The BJP has said that measures for the revival of the economy are its priority if the party comes to power after elections. India's GDP growth has slowed to a decade low of below 5%. The GDP grew 4.7% in Q3 December 2013.
PSU OMCs gained as diesel prices were on Monday, 12 May 2014, hiked by Rs 1.09 a litre, excluding state levies. BPCL scaled record high. HPCL hit 52-week high. Among capital goods stocks, Bharat Heavy Electricals scaled 52-week high. Among oil exploration stocks, ONGC scaled record high.
The market surged amid initial volatility. The Sensex and the 50-unit CNX Nifty, both, scaled record high. Firmness continued on the bourses in morning trade.
The market sentiment was boosted by data showing that foreign funds made substantial purchases of Indian stocks on Monday, 12 May 2014. Foreign institutional investors (FIIs) bought shares worth a net Rs 1217.95 crore on Monday, 12 May 2014, as per provisional data from the stock exchanges.
At 10:20 IST, the S&P BSE Sensex was up 283.65 points or 1.2% at 23,834.65. The index jumped 370.91 points at the day's high of 23,921.91 in early trade, a lifetime high for the index. The index rose 178.25 points at the day's low of 23,729.25 in early trade.
The CNX Nifty was up 88.70 points or 1.26% at 7,102.95. The index hit a high of 7,116.20 in intraday trade, a lifetime high for the index. The index hit a low of 7,067.15 in intraday trade.
The BSE Mid-Cap index was up 120.62 points or 1.61% at 7,631.35. The BSE Small-Cap index was up 117.98 points or 1.55% at 7,750.27. Both these indices outperformed the Sensex.
The market breadth, indicating the overall health of the market, was strong. On BSE, 1,344 shares gained and 692 shares fell. A total of 109 shares were unchanged.
Among the 30-share Sensex pack, 25 stocks gained and rest of them fell. Tata Steel (up 4.44%), NTPC (up 4.04%) and GAIL (India) (up 4.09%) edged higher from the Sensex pack.
ONGC rose 4.46% to Rs 374.40 after hitting record high of Rs 380.05 in intraday trade.
Bharat Heavy Electricals (Bhel) surged 7.55% to Rs 213.48 after hitting 52-week high of Rs 217.35 in intraday trade.
PSU OMCs gained as diesel prices were on Monday, 12 May 2014, hiked by Rs 1.09 a litre, excluding state levies. Indian Oil Corporation (IOCL) rose 3.23%.
HPCL gained 3.1% to Rs 389.10 after hitting 52-week high of Rs 389.80 in intraday trade.
BPCL rose 3.42% to Rs 518.85 after hitting record high of Rs 520 in intraday trade.
IOC increased the Price of Diesel (Retail) by Rs 1.09 per litre (excluding state levies) from midnight of 12 May 2014 - 13 May 2014. Even after the proposed price increase, diesel (retail) shall still be left with an under-recovery of Rs 5.71 per litre (based on pricing cycle applicable for 1st fortnight of May 2014), Indian Oil Corporation (IOC) said in a statement.
Public sector oil marketing companies (PSU OMCs) suffer under-recovery on domestic sales of diesel, kerosene and LPG at government controlled prices. In January 2013, the government allowed PSU OMCs to raise diesel prices in small measures at regular intervals. The government has already freed pricing of petrol.
In the foreign exchange market, the rupee edged higher against the dollar as equities rose after exit polls on Monday, 12 May 2014, signaled victory for the Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) in the Lok Sabha elections which were concluded on Monday, 12 May 2014. The partially convertible rupee was hovering at 59.80, compared with its close of 60.05/06 on Monday, 12 May 2014.
On the macro front, inflation based on the combined consumer price index for urban and rural India accelerated to 8.59% (provisional) in April 2014, from 8.31% (final) in March 2014, data released by the government after trading hours on Monday, 12 May 2014, showed.
Another data released by the government after trading hours on Monday, 12 May 2014, showed that industrial production shrank for a second straight month in March 2014. Industrial production declined 0.5% in March 2014, compared with a contraction of 1.8% in February 2014. Mining production declined 0.4% and manufacturing sector registered a contraction of 1.2% in March 2014. Electricity generation rose 5.4% in March 2014. As per use-based classification, production of basic goods rose 4% and that of intermediate goods rose 0.6%. Production of capital goods registered a contraction of 12.5%. The consumer goods sector registered a contraction in production of 0.9% in March 2014. Within the consumer goods sector, production of consumer non-durables registered a growth of 7.2% whereas production of consumer durables registered a contraction of 11.8% in March 2014.
For the year ended 31 March 2014 (FY 2014), the industrial production registered a contraction of 0.1%. The fall in February's output was revised to 1.8% from 1.9% reported earlier.
The rate of inflation based on the wholesale price index is expected to remain at 5.7% in April 2014, at the same level it was in March 2014, as per the median estimate of a poll of economists carried out by Capital Market. The government will unveil data on inflation based on the wholesale price index (WPI) for April 2014 at about 12:00 noon on Thursday, 15 May 2014.
The Reserve Bank of India (RBI) next undertakes monetary policy review on 3 June 2014. The RBI left its main lending rate viz. the repo rate unchanged at 8% after a monetary policy review on 1 April 2014, as consumer-price inflation eased to a two-year low and as the rupee firmed up against the dollar.
Asian stocks rose on Tuesday, 13 May 2014, as investors weighed earnings and after US stocks climbed to records overnight. Key benchmark indices in Indonesia, South Korea, Hong Kong, Taiwan, and Japan were up 0.21% to 1.9%. China's Shanghai Composite was off 0.06%. Markets in Malaysia, Singapore, Thailand and Bangladesh are closed for a holiday.
Trading in US index futures indicated that the Dow could gain 17 points at the opening bell on Tuesday, 13 May 2014. The US stock market ended Monday with best gains in nearly a month that sent both the S&P 500 and the Dow Jones Industrial Average to record levels. Broad-based gains on the S&P 500 were led by technology and industrial sector stocks, while deal news in the food industry boosted investor sentiment.
The economic calendar was light on news Monday. The US government recorded a budget surplus of $107 billion in April, the Treasury Department reported Monday, a smaller windfall than in the same month last year. The April surplus contributes to a steady decline in the deficit for fiscal 2014. Shrinking US deficit could help keep interest rates low.
The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 17-18 June 2014. The Fed on 30 April 2014 said after a monetary policy review that it will keep the benchmark interest-rate target at almost zero for a "considerable time" after its bond-buying program ends. The FOMC also reduced monthly debt purchases to $45 billion, its fourth straight $10 billion cut, and said further reductions are likely in "measured steps" if the economy continues to improve.
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