Stocks rally on hint of saffron victory in polls

Tags: News

Sensex hits one-month high, rupee surges against dollar

Investors on Thursday cheered the outcome of the exit polls that suggested a decisive victory for the BJP in the assembly elections in four out of the five states, lifting the BSE Sensex to a one-month high.

Not to be left behind, the rupee also hit the highest level against the dollar since October 31, as foreign investors pumped in more money into stocks.

Market analysts reckoned that a BJP victory in the semifinals may force the government to speed up reforms ahead of the finals, or the national elections in May next year.

Sensex hit 21,151.46 immediately on opening, but ended the day lower at 20,957, up 249.10 points, or 1.20 per cent, from Wednesday. It was the highest close for the benchmark since November 5. NSE’s Nifty index nearly touched the 6,300 mark, before closing at 6,241, up 80.15 points, or 1.30 per cent.

The rupee rose 0.5 per cent to 61.7650 to the dollar, according to prices at local banks compiled by Bl­oomberg. It touched a high of 61.5350, the strongest level since October 31.

Analysts consider the BJP to be more business-friendly, and reckon that expectations of a big victory for the saffron party may lead to additional gains in the Indian equity indices that are already near record highs.

“Today’s surge was largely due to the outcome of the exit polls. If the final results are more or less in line with the exit poll results, the market may consolidate due to profit booking. However, if the final outcome is better than predicted, we would see further rise,” said Pankaj Pandey of ICICIdirect.

“There were no global cues today (Thursday),” he pointed out. However, Pandey ruled out any knee-jerk reaction from the Congress or stalling of the reforms that it had begun after P Chidambaram returned as finance minister in July 2012.

HDFC Securities said the market got the news it wanted to hear through the exit polls. The exit polls “unanimously suggest that Rajasthan and Madhya Pradesh have gone the saffron way. Two out of three surveys have handed over Chhattisgarh back to BJP and one showed though BJP would be the largest party, it may fall short of a majority. This is the news the market had expected and it has got it,” the brokerage said.

HDFC Securities said investors should remember that what happens to crude, employment data in the US and whether the US Fed would begin tapering this month would decide how the December series F&O contracts fare. Foreign institutional investors (FIIs) were net buyers of stocks worth Rs 1,151.51 crore on Thursday, as per the provisional figures available on the websites of the stock exchanges. FIIs have been big buyers so far this calendar, with Sebi data showing $17.87 billion (Rs 99,279.50 crore) FII inflow to Indian equities so far this calendar.

Among the sectors, top gainers were the banking index (4.44 per cent) and the capital goods index (3.59 per cent). Healthcare (down 1.47 per cent), FMCG (down 0.94 per cent) and IT (down 0.51 per cent) were the lagging sectors amid a broader market rally.

ICICI Bank (up 6.66 per cent to Rs 1,136.10) and HDFC Bank (up 4.52 per cent to Rs 687.75) were top gainers in the Sensex pack. Other winners were L&T (up 4.49 per cent to Rs 1,086.65), BHEL (up 3.93 per cent to Rs 170.55), Maruti Suzuki (up 3.67 per cent to Rs 1701.45) and Coal India (up 2.87 per cent to Rs 279.60).

Top Sensex loser were Sun Pharma, Dr Reddy’s and Cipla along with Hindustan Unilever and ITC. Tata Motors also ended in the negative territory. Can the election results be very different from what has been projected, making investors to sell stocks on Monday? The final results will be announced on Sunday.

“If the track record of the Indian psephologists is anything to go by, you can’t depend on the accuracy of these polls. In 2004, the exit polls told us NDA will win in the national polls. But UPA breasted the tape in the final results. In 2009, pollsters told you that a very thin difference was there between the NDA and the Congress. But in the end, the UPA was ahead by almost 100 seats,” said HDFC Securities.

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