Today, the Indian stock market experienced a remarkable surge as the Nifty 50 and the Sensex, the country’s benchmark indices, reached unprecedented levels in early trading. This surge was triggered by the results of exit polls conducted on Saturday, June 1, which indicated that the Bharatiya Janata Party (BJP)-led NDA is likely to secure over 350 seats out of the 543 in the Lok Sabha elections of 2024.
The Indian stock market successfully navigated through concerns related to the elections, as the results of the exit polls indicated that the BJP-led NDA is likely to regain power with a significant majority.
The Sensex began the day with a significant increase of 2,622 points, opening at 76,583.29 compared to its previous closing value of 73,961.31. It then experienced a further surge of 2,778 points, equivalent to a 3.8 percent rise, reaching a new all-time high of 76,738.89.
Similarly, the Nifty 50 started off with a notable gain of 807 points, opening at 23,337.90 in contrast to its previous close of 22,530.70. It continued to climb and achieved a fresh record high of 23,338.70, an increase of 808 points or 3.6 percent during early trading.
Investors engaged in a frenzied buying spree across different sectors, resulting in significant increases in the midcap and smallcap indices. Both indices soared by almost 4 percent, establishing new record highs.
The BSE Midcap index experienced a remarkable surge of 4 percent, reaching an unprecedented all-time high of 44,560.97. Simultaneously, the BSE Smallcap index witnessed a substantial jump of 3.6 percent, setting a fresh record high at 48,973.96.
On Monday, a significant number of stocks, such as SBI, ICICI Bank, Axis Bank, Bharti Airtel, Larsen and Toubro, Mahindra and Mahindra, NTPC, and Power Grid, reached new 52-week highs during intraday trading on the BSE. This marked an increase in their stock value compared to the previous year.
In May, both the Nifty 50 and Sensex experienced a decline after a streak of three consecutive months of gains. This drop was primarily caused by increased volatility, which was driven by uncertainties surrounding the elections. The India VIX, which measures market volatility, saw a sharp surge of 91 percent during the month of May.
Although the results of the exit poll were the primary driving force, experts have identified three additional factors that may have contributed to the positive sentiment in the stock market.
Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities, stated that the Nifty opened with a significant increase mainly due to the exit poll numbers, which indicated a decisive victory for the BJP-led NDA government for the third consecutive time. In addition to this, there were other factors that contributed to the upward movement of the index. These factors include better-than-expected GDP figures, a strong rebound in US markets on Friday, the onset of monsoon season, and a decrease in fiscal deficit.
According to Sheth, the Nifty 50 is currently positioned above the upper boundary of the ascending parallel channel. He is of the opinion that as the counting begins on June 4th, the index has the potential to reach 23,500.
Sheth advises traders to take advantage of this opportunity by securing profits in their existing long positions and patiently waiting for Nifty to experience a dip around the levels of 23,000 to 22,800. This would be an ideal time to establish new long positions.
Sheth further states that the medium-term target for Nifty is approximately 24,500.
Four key catalysts that propelled the market to reach unprecedented levels:
Exit poll results
Most exit polls conducted on June 1st predicted a historic third term for Prime Minister Narendra Modi-led National Democratic Alliance (NDA) government at the Centre. According to at least ten exit polls, the NDA, led by the Bharatiya Janata Party (BJP), is expected to secure over 350 seats.
Three prominent exit polls – India Today-My Axis India, India TV-CNX, and News24-Todays Chanakya – have projected over 400 seats for the NDA. On the other hand, the Opposition INDIA bloc is predicted to win less than 200 seats.
Following the conclusion of the Lok Sabha elections, analysts anticipate that the market will remain in positive territory in the coming days, unless there are any unforeseen negative developments.
“We predict that Indian stocks will rise over the next 3-4 days, with the Nifty reaching a new all-time high this week. During this period, we expect the Nifty to reach approximately 23,200-23,300 levels. Additionally, we foresee the India 10-year yield rising to 6.9 percent and the Indian rupee appreciating to 82.75,” stated Amit Goel, Co-Founder & Chief Global Strategist at Pace 360.
Positive global cues
Global market sentiment was boosted by positive cues from overseas. Inflation continues to be a concern, but there is growing optimism for rate cuts in Europe. The possibility of rate cuts by the US Federal Reserve in the latter half of the year is also being considered. Additionally, recent macroeconomic data from key Asian economies has shown positive growth. Japan’s factory activity expanded for the first time in a year in May, and South Korea’s factory activity saw its fastest growth in two years, according to Reuters.
Macro boost
As per the data published by the National Statistical Office (NSO) on Friday, May 31st, India’s economic output (GDP) for the period of January-March in fiscal year 2023-24 (Q4FY24) stood at 7.8 percent. Furthermore, for the entire FY24, the Indian economy expanded by 8.2 percent, surpassing expectations.
Additionally, the fiscal deficit of the government for the fiscal year 2023-24 amounted to 5.63 percent of the Gross Domestic Product (GDP), slightly surpassing the projected 5.8 percent stated in the Union Budget. This information has been disclosed by the Controller General of Accounts (CGA) on Friday, May 31st.
“The GDP figures released on Friday surpassed expectations, showing a growth rate of 8.2 percent. This positive outcome will serve as a strong foundation for the market. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, commented on the additional positive note of S&P’s upward revision of India’s rating outlook.”
The outlook for India was upgraded by S&P Global on Wednesday, marking the first positive and stable outlook in 14 years. The reason for the upgrade was attributed to India’s robust macroeconomic fundamentals and government capital expenditure. Despite this positive development, S&P Global maintained its sovereign credit ratings at ‘BBB-/A-3’, the lowest rating offered by the agency. The report advised caution but also noted an overall increase in buying activities across the board.
The market saw extensive purchasing, driven by the banking, financial, metal, real estate, and oil and gas sectors. The Nifty Bank index experienced a significant increase of over 4 percent, reaching a new all-time high of 50,990.
During morning trading, the Nifty PSU Bank index skyrocketed by nearly 7 percent, while the Realty, Metal, and Financial Services indices surged by up to 4 percent.
Disclaimer: The opinions and suggestions expressed above belong to individual analysts, experts, and brokerage firms, and do not represent the views of Dawkco News. It is strongly recommended that investors seek advice from accredited professionals prior to making any investment choices.
