D-Street gets Adrenaline Rush

Tags: Stock Market

Investors rush to bank shares as prospects of a stable govt lift indices to new peaks

D-Street gets Adrenaline Rush
Domestic equity benc­hmarks Sensex and Nifty rallied over 1.3 per cent on Monday to close at new highs of 22,055 and 6,583.50, respectively, on rising prospects of the April-May elections throwing up a stable government at the centre.

The S&P BSE Sensex gained 300.16 points to close above the 22,000 mark for the first time after touching an intra-day high of 22,070.9.

Earlier on March 10, the index had broken the 22,000 barrier, but closed lower. The 50-share Nifty closed at a new high of 6,583.50, up 88.60 points.

Bank shares were in big demand as FIIs said to have rushed to the counter, lifting BSE Bankex 2.73 per cent. The other big sectoral gainer was the BSE oil & gas index, which rose 2.46 per cent.

The remaining sectoral indices underperformed the Sensex. Foreign institutional investors were net buyers of equities worth Rs 1,465.62 crore while domestic institutional investors were net sellers of Rs 770.39 crore.

The rupee gained 12 paise to 60.77 to the US dollar as FIIs invested Rs 4,280.90 crore in equities on Friday.

Strong Asian markets also helped the rally in the domestic market.

Japan’s Nikkei closed 1.77 per cent higher, Hong Kong’s Hang Seng gained 1.91 per cent and China’s Shanghai Composite rose 0.91 per cent.

TURN

Investors and analysts have betted heavily on the outcome of the general election. Latest opinion polls indicate that the BJP-led opposition is consolidating its position ahead of the general election scheduled for April-May, said Barclays analysts Siddhartha Sanyal and Rahul Bajoria.

In a report to clients, the two pointed out that the BJP-led NDA coalition was leading not only the incumbent UPA in polls, but also the consolidated tally of all smaller and regional parties for the first time since April 2013.

The gains were limited to frontline companies from the BSE 500 index, while those in the BSE midcap and smallcap indices closed with small gains of 0.13 per cent and 0.15 per cent, respectively.

Top Sensex gainers were GAIL (4.81 per cent), ONGC (4.27 per cent), ICICI Bank (3.71 per cent), Coal India (2.81 per cent), HDFC Bank (2.53 per cent), Reliance Industries (1.83 per cent), Axis Bank (1.53 per cent) and SBI (1.35 per cent).

“The consensus among equity investors appears to be to go long into the April-May polls in the hope of a fourth successive stable coalition,” Bank of America Merrill Lynch economists Indranil Sen Gupta and Abhishek Gupta said in a report after meeting over 20 equity and fixed income investors in Singapore last week.

“We see a high possibility of a fourth successive stable coalition after the May 16 counting. Opinion polls place the BJP in the lead, although we also acknowledge that poll predictions went wrong in 2004 and 2009,” they said.

Some analysts also saw recovery signs in select segments of the economy, which they felt, has helped the market momentum.

Barclays’ Sanyal and Bajoria said, “We see emerging green shoots of recovery, as bottlenecks in key industries such as power, mining and domestic services sector are easing at the margin… we think these improvements could facilitate a growth recovery in FY 14-15, especially in case of a favourable election outcome.”

“Some sectors are showing signs of improvement; electricity production has risen dramatically in last 3-4 months,” the Barclays report said.

Analysts expect the market to turn volatile ahead of the expiry of futures and options contracts later this week.

Vinod Nair, head of fundamental research at Geojit BNP Paribas Financial Services, said: “The rally was led by largecap stocks, especially those from the banking and energy segments. Market expectation of the election result remains strong and a drag in the near term, if any, may come from global developments, namely Ukraine and interest rate expectations in the US. The market may see some consolidation after the F&O expiry.”

The Bank of America Merrill Lynch analysts said, “Growth has gone up and come down in every political regime, broadly in tune with the global cycle. Our base case is of a weak recovery in growth to 5.4 per cent from 4.7 per cent in FY14 assuming political stability; a 50-75bp cut in lending rate and a normal monsoons.”

raviranjan@mydigitalfc.com

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