Markets in frenzy over NDA prospects
May 13 2014 , Mumbai
Nifty and Sensex rose 2 per cent each to their second consecutive record highs on Monday while the rupee rallied to a 10-month high on rising hopes that the NDA will win a comfortable majority in the national elections.
Later in the day, exit polls showed the Modi-led NDA was on course for election victory.
Such surveys have proven unreliable in the past and the actual results are due only on Friday.
BSE benchmark Sensex gained 556.77 points, or 2.42 per cent, to close at a new all-time high of 23,551 while Nifty rallied 155.45 points, or 2.27 per cent, to end the day at 7,014.25, a lifetime high.
Analysts said market rumours that exit polls would show a comfortable victory for the BJP-led NDA with around 275 seats triggered the investor frenzy on the largecap counters.
Later in the evening, an exit poll conducted by research group C-Voter predicted 289 seats for NDA — well beyond the 272 majority mark — while another survey by Cicero for the India Today group showed the NDA winning between 261 and 283 seats.
Several exit polls overestimated the BJP’s seat share in the last two general elections in 2004 and 2009, when the Congress-led went on to form the government.
Nifty took the longest time to travel from the 6,000 mark (December 6, 2007) to 7,000 (May 12, 2014).
The 50-stock index kicked off at 1,283.38 on November 7, 1994 but dipped below 1,000 level thereafter before surging to new highs, data from by corporate database Capitaline showed.
Despite the surge in the benchmark, the market breadth was slightly negative on BSE, with 1,491 stocks declining and 1,476 stocks advancing. The BSE midcap index rose 0.73 per cent and the smallcap index 0.51 per cent. The BSE500 index, which represents over 90 per cent of BSE market capitalisation, gained 1.91 per cent. The market capitalisation of the BSE-listed companies rose by just Rs 1,789 crore to Rs 77,77,675 crore from Rs 77,75,886 crore as a large number of stocks declined.
Shrikant Chouhan, head of technical research at Kotak Securities, said, “The market moved upward mainly in the hope of a likely positive outcome in the exit polls. However, such move in frontline and index stocks is increasing the valuation gap between midsize stocks and frontline stocks. In case the outcome of the event comes as per expectations, we can expect massive buying in midcap stocks,” he said.
Foreign brokerage Macquarie said the market was pricing in the BJP winning 230 seats, calling that its ‘base case’ as well. Macquarie estimates a number around that range could spark gains of 5-10 per cent in Indian shares over one month, while a number above 240 seats would spark 15-20 per cent gains.
Foreign institutional investors were net buyer of securities worth Rs 1,217.95 crore, almost duplicating last Friday’s show.
Domestic institutional investors also turned net buyers, purchasing shares worth Rs 92.56 crore against Rs 75.30 crore worth of net sales on Friday.
Alex Mathews, head of research at Geojit BNP Paribas Financial Services, said, “Optimism of a strong government at the centre, sustained FII buying and a better trade deficit data were the reasons behind the upward movement.”
The trade data, released on Friday after market hours, showed a 5.26 per cent rise in exports at $25.63 billion in April compared with declines in the previous two months.
Sonal Varma and Aman Mohunta, analyst at Nomura India, said: “The trade deficit narrowed in April, and was better than expected, as the export momentum improved while imports remained sluggish. We expect the current account deficit to remain within sustainable level of 1.7 per cent of GDP in FY15 with an overall balance of payment surplus of around $25billion.” Sectors that drove the rally included oil and gas (3.07 per cent), power (2.98 per cent), capital goods (2.78 per cent), auto (2.88 per cent) and FMCG (2.53 per cent).