Politics breathed some fresh momentum into the stock market on Thursday with the Sensex surging 457 points to an intra-day high of 21,166, before erasing initial gains to close up 249 points, or 1.2%, to 20,958.
The benchmark index zoomed on expectations of a stable government at the Centre and strong economic reforms after exit polls predicted a win for the Bharatiya Janata Party (BJP), in the state elections of Rajasthan, Madhya Pradesh, Chhattisgarh and Delhi. This is the index’s highest closing level since 20,975 on November 5.About `48,919 crore in investor wealth was added during the day.
The NSE Nifty also spurted 80 points, or 1.3%, to 6,241.
Confirmation of the exit poll predictions of gains for the BJP when results are out on Sunday would be seen as bolstering its chances of victory in general elections due by May, Bank of America Merrill Lynch said in a report.
Foreign investors, the biggest drivers of stocks, feel a strong and decisive government is crucial for India’s economic growth.
“Indian equities ended with strong gains as exit polls predicted a strong position for the BJP in state elections,” said Amar Ambani, research head, IIFL.
“The sentiment is expected to improve on expectation of a stable government at the Centre. Investors can hope for strong economic reforms,” added Rikesh Parikh, vice-president, institution corporate broking, Motilal Oswal.
Among the 30 Sensex stocks, 20 ended with gains led by ICICI Bank (up 6.7%), HDFC Bank (4.5%) and Larsen & Toubro (4.5%).
Shares of Gujarat-based Adani Group firms, perceived to be close to BJP’s prime ministerial candidate and Gujarat chief minister Narendra Modi, also rose Shares of Adani Ports and Special Economic Zone closed up 3.9% to `160 on the NSE, Adani Power gained 2.8% to `39 and Adani Enterprises ended up 1.1% to `270.
“There is the sentiment that a BJP victory will give a big boost,” said Arun Kejriwal, head of investment consultanting firm KRIS.