Ever since the Bharatiya Janata Party has been declared a winner in the Lok Sabha elections, equity markets have been scaling newer highs on hope that the new government under the Prime Minister in waiting, Narendra Modi, would put the economy back on the growth path.
The BSE Sensex hit an intra-day high of 24448.47 points, much below the all-time intra-day high of 25375.63 scaled on Friday, when the polls indicated a landslide victory for the BJP. The Sensex rose 241.31 points for a new closing peak of 24363.05 or 1% on Monday, while the broader index, NSE Nifty too ended on a new high of 7262.55 or 60.55 points.
Foreign fund inflows continued to strengthen the rupee as demand for the currency intensified following some trade demands. From the level of 58.78 a dollar, the rupee gained to an intra-day high of 58.38 before the Reserve Bank of India intervened to prevent sharp surges. "Nobody (FIIs) is taking out money even after profit-taking. This implies there is a churn in portfolio happening," said Arun Kejriwal of Kejriwal Research.
The bullish trend is there to stay for long, he added. According to Rahul Shah, vice president-equity advisory at Motilal Oswal, "in the near term (three months) we expect the Sensex to touch 27500 while for the Nifty it could be around 8000 mark."
"Valuations are comfortable and there is a shift of sector rotation. We've seen sell offs in pharma and IT," he added.
Foreign institutional investors pumped in Rs 1,350 crore into equities taking the total fund infusion this month to Rs 13,889 crore. Domestic investors were net sellers on Monday selling Rs 348.48 crore worth of equities, thereby, bringing down their net investments to a mere Rs 93 crore in May.
Of 50 stocks in Nifty, 29 advanced while the rest declined. Among the stocks that rose sharply were from the infrastructure, PSU banks, oil and gas sectors. Bhel ended with a 14.42% gain at Rs 265, Coal India rose 13.20% at Rs 391, NTPC at Rs 147 was up 12.16% and government-owned Punjab and National Bank closed with 11.23% gains at Rs 1,021. Prominent among the losers were IT stocks like TCS at Rs 2,026, down 6.24% and Infosys at Rs 3,010, down 5.27% while pharma major Dr Reddy dropped 5.68% to Rs 227.50.
On the other hand, investors are placing bullish bets on government banks, oil & gas and government oil marketing companies, say market participants.