Markets may touch new highs as poll fever rises

With just eight trading sessions left before general elections begin, the market is gearing up for new highs in anticipation of stable global macros, strong inflows from foreign institutional investors (FIIs) and a possible comeback of the ruling party.

The Lok Sabha elections, beginning on April 11, will keep the domestic equity market volatile in the short-term.

BSE Sensex closed at 38672.91 on Friday, up 127.19 points or 0.33% than the previous close. NSE Nifty 50 ended 53.90 points or 0.47% higher at 11623.90.

An analyst with a brokerage house said the overall market is expected to remain positive and garner good gains for investors till the elections, after strong FII inflows seen in March along with the anticipation that BJP-led government will make a strong comeback. Both Nifty and Sensex had one of their best runs in the financial year ending March 31, 2019, rallying over 15% during the year, the analyst added.

"On the back of the 2019 general elections and expectation of formation of a stable government, the market has seen a surge with Sensex rallying almost 8% in March. Buying has been mainly led by FIIs who have pumped around Rs 45,000 crore into domestic markets. Any rate cuts in developed markets such as the US or Europe may result in steady inflows for the emerging markets (EMs)," said Hemang Jani, head – advisory, Sharekhan by BNP Paribas.

Over the longer term, earnings growth and revival in private capex remain crucial for further market upside, Jani added.

Pritesh Mehta, senior vice president, YES Securities, said till February 2019, Indian indices were at the bottom of the pack among the global markets.

"China was the major mover in emerging markets after a turbulent 2018. A more dovish Fed and resumption of US-China trade talk contributed to a rally in EMs. However, March has proved to be decisive as Nifty has so far rallied by nearly 7% and it is whiskers away from its all-time peak," Mehta said.

According to him, March saw Nifty breaking out from a three-month consolidation period between 10600-11100 and "the architect of the recent rally" has been the leadership sectors i.e, Bank Nifty (up 14%) & Nifty Energy (up 11%). Even the Midcap 100 index has been among the major movers in March, rallying by over 8%.

"Nifty internals suggest that the recent rally has been broad-based compared to the previous ones as 29 stocks from the index have outperformed Nifty so far – A perfect ingredient for a sustained rally. We expect Nifty to continue its northbound journey and attempt 12100-levels," Mehta said.

V K Sharma, head - PCG and Capital Markets Strategy, HDFC Securities, said massive FIIs Inflows – nearly $5 billion in March Series, stronger rupee and rise in the possibility of BJP coming back to power helped markets to do well in the March series.

According to him, Nifty has risen 1.46% in the week ended March 29 and Bank Nifty has outperformed the Nifty by surging 2.85%, reaching a level around 30500.

"Nifty has recently surpassed the resistance level of 11572 and is all set to register new all-time high above 11760," he said, adding that metal, financial services (NBFC) and infra sectors look promising.

However, Mehta feels that the recent market uptrend should not be termed as pre-election rally, as the Indian markets had been devoid of sideways consolidation for the entire 2018.

"Index on several instances had strong trending moves but lacked period of time-wise correction. The time-wise correction prior to recent explosive move has set the wheels in motion for higher targets irrespective of election verdict," he said.

BULLISH MODE

• Sensex has rallied almost 8% in March. Buying was led by FIIs who have pumped around Rs 45,000 crore into domestic markets
   
• Over the longer term, earnings growth and revival in private capex remain crucial for further market upside