Equity markets are likely to remain euphoric in the coming days following the BJP's emphatic victory in the general elections, even as participants may start to shift their focus to policy reforms, earnings growth and global cues, analysts said.
The Sensex and Nifty rallied to record closing highs Friday after the ruling BJP secured a comfortable majority in the lower house, raising expectations of more business-friendly measures by the Narendra Modi-led government.
"Stock market likes certainty. The strength of this mandate for the BJP assures stability in government, stability in governance and continuation of the development agenda for the next five years. In all likelihood, the market will remain euphoric in the coming days. Post that, focus will shift back to corporate earnings, liquidity situation and global events," said Amar Ambani, President and Head of Research, Yes Securities.
The Bharatiya Janata Party (BJP) has won over 300 seats on its own out of 542 seats in the Lok Sabha elections.
"Markets had a very vigorous week and therefore sufficient rest will be needed before it can find new pace. Volatility will eventually come down and rationality will prevail. Benchmark indices might not give any direction this week but could face mild downward pressure and Indian markets will finally align with global mood.
"As of now, a wait and watch approach should be followed by markets at least till the monetary policy and budget announcement by the elected government, which might be a game changer," said Jimeet Modi, Founder and CEO, SAMCO Securities and StockNote.
Last week, the 30-share BSE Sensex gained over 1,503 points to close at 39,434.72 on Friday.
Mustafa Nadeem, CEO, Epic Research said, "An event has finally come to an end with the mandate and now markets are about to shift its focus to other factors. At this point of time for market, we believe one of the factors that's crucial is crude oil. Markets will also try to establish the earnings guidance for next fiscal and quarters."
BHEL, GAIL, InterGlobe Aviation, PNB and SpiceJet are among the major companies set to announce their results this week.
The ongoing trade tussle between the US and China, movement of rupee, crude oil and investment trend by overseas investors would also influence trading, analysts added.
According to Vijay Chandok, MD and CEO, ICICI Securities, "With the decisive mandate, we expect policy continuity and look forward to next generation of reforms, which will take Indian economy to the next phase of accelerated growth. The optimism of a strong mandate could have a positive impact on both FPI flows and domestic flows (which have been lacklustre in the recent past)."
"With the stable government in the saddle for the next five years, we expect reforms process to gather momentum. The economy was in the repair mode for the last 5 years. We expect the government to take affirmative measures to ensure that the economic engine fires on all cylinders.
"The government has to ensure that rural distress is attended, liquidity crisis in financial/debt markets is taken care of and conducive atmosphere for industrial growth is established to capitalise on the demographic dividends of the country," Axis Securities said in a note.