Markets hits a new high with expectations of a Narendra Modi-led BJP government with an absolute majority

Indices hit a record high on Friday on the back of an alleged exit poll document that inferred an absolute majority for the BJP even though the last phase of elections ends only on Monday, May 12.

Both, the BSE Sensex and the Nifty, were at all-time peaks of 22,994.25 and 6858.80 respectively by the end of trade on Friday. The Sensex surged 650.19 points or 2.91%, while the Nifty ended 198.95 points or 2.99% higher from their previous close.

"The markets have risen on account of talks that Modi would be the prime minister and his party, BJP, would come to power," said Arun Kejriwal, of an advisory firm, Kejriwal Research.

One broker said of the eight phases of elections held so far, exit poll findings of seven have been leaked even though there is a diktat against officially announcing the exit poll report till the midnight of Monday, when the last phase of election would be concluded.

Since February 4 this year, the markets have been on a high on two accounts: one that the UPA government would be routed out in the elections and second, the prime ministerial candidate of BJP, Narendra Modi, would address the current government's policy paralysis under which the economy was reeling, if he comes to power.

Even though the fiscal year 2014 ended with a 4.9% GDP growth, much less than the high of 9% levels of 2006 to 2008, the stock indices have been showing positive upward moves. During the UPA regime, the GDP rate fell by nearly half due to its own undoing.

Market participants do not expect even a 100 basis point rise in GDP until the next five quarters at the least. But then, the market sentiments have turned bullish based on future earnings.

There are no strictures against the findings of any exit poll being made known to select major brokerages.This seems to be the only reason for markets to shoot up today. With this rise the markets has recovered a little more than the last nine days decline.

Among the top sectoral gainers were banking with 5.34%, realty at 4.38%, power 4.12%, oil & gas 3.44% and capital goods 3.34%.

Of the 50 stocks on Nifty, 46 advanced, three were down and one remained unchanged. Top Nifty gainers were IDFC at Rs 117.45 was up 8.25%, ICICI Bank Rs 1382 (up 7.21), Ambuja Cement Rs 206 (6.76%), Axis Bank Rs 1,650 (6.19%) and Tata Power Rs 80.65 (5.70%). Losers were Lupin at Rs 964.80 (down 1.48%), Dr Reddy's at Rs 2710 (0.99%) and NMDC at Rs 149, was marginally down by 0.03%.

Market participants expect volatility to remain high in the coming week due to the political scenario. The NSE volatility index (VIX) was up 9.93% at 37.71 and indicates the shape of things in the days to come till the official poll results are out, said Samir Dholakia, a market participant.

Monday is the last round of polling in Bihar (six seats), Uttar Pradesh (18) and West Bengal (17). The market reaction reflects a perception that the BJP will form a government on its own without allying with TMC, BSP and AIADMK. These three possible allies are viewed suspiciously by the market.

All eyes are now on the exit polls outcome on May 13th. " If the exit polls indicate below absolute numbers coupled with alliances with any of the three political outfits ( TMC, BSP and AIADMK), the market could be in for a steep correction downwards," said a top executive at a foreign fund brokerage.

Pro -Modi sentiments
Bank stock surge on expectation of lower rates, higher credit growth under new government

Infrastructure stocks zoom on renewed hopes of new policies, revival of stagnant investment climate

Oil & gas stocks; bullish uptick on speedy policy clearance/removal of bottlenecks