Indian stocks ride on exit polls to biggest gain since 2013
In similar movement, the broader NSE Nifty soared 393.95 points, or 3.45 per cent, to 11,801.10.Updated: May 21, 2019 07:56 IST
Within 60 seconds of opening on Monday morning, Indian stocks that are traded on BSE added ₹3.18 lakh crore in value (compared to their Friday close) as the market reacted positively to exit polls, most of which predicted the return of Narendra Modi’s Bharatiya Janata Party (BJP)-led coalition when results are announced on May 23.
By close of day, the stocks on BSE added ₹5.24 lakh crore in market value (or market capitalisation). Across BSE and the National Stock Exchange (NSE), Monday was the best day for Indian stocks in six years.The BSE’s benchmark Sensex index closed 1,422 points (3.75%) higher at 39,352.67 and NSE’s Nifty index, 3.69% (421.10 points) higher at 11,828.25. Both were record highs.
It wasn’t just stocks: the rupee and sovereign bonds too rose.
The rupee gained 48 paise to the dollar and ended the day at ₹69.74 to the dollar as compared to Friday’s close of ₹70.22.
Yields on benchmark 10-year bonds were at 7.29%, down .07 percentage points. They touched 7.27% in the course of the day. Bond yields and prices move in opposite directions.
The markets were reacting to prospects of a strong and stable government which would hopefully focus more on reforms than populism.
“We hope to see a continuation of what we saw in the first part of Modi’s term when the government implemented measures to improve business climate, the bankruptcy code, GST [Goods and Services Tax], demonetisation,” said Arjen van Dijkhuizen, Chief Asia Economist at ABNAmro in Amsterdam. “The latter part of his term has been more populist to appease his voter base. We now hope the momentum on reforms will accelerate.”
Several of the exit polls gave the BJP on its own a majority in the 543-member Lok Sabha.
Brokerages predicted further gains in the market. UBS Securities said on Monday in a note that if the BJP gets a majority on its own, the Nifty could rise 5-10% in “the near term”. Kotak Securities said that if the NDA returns it expects implementation of reforms to improve “ease of doing business”. And CLSA said “a potential thumping win for Modi will likely bring back domestic flows which should be good news for mid-caps”.
Mid-caps are medium capitalisation stocks, typically with a market value of between ₹8,600 crore and ₹28,000 crore, according to Association of Mutual Funds in India’s market capitalisation classification.
However, some analysts pointed to limiting factors that could halt the rise of the markets.
“The exit polls have been better than market expectations with the ruling party getting a comfortable majority. However, the market has been rallying for the last two days and it has factored the information to some extent. The market is likely to rally further but the rally may not be significant as there are challenges of not-so-encouraging earnings growth, lower liquidity, a slowing economy and global challenges,” said Naveen Kulkarni, head of research, Reliance Securities.
Among the biggest gainers were Adani Enterprises Ltd, which led the list with a 27.41% rise, TVS Electronics Ltd and Sumeet Industries Ltd.
(With inputs from Reuters)
First Published: May 20, 2019 09:22 IST