After exit poll green light, markets scale record high

A day after exit polls indicated five more years of the Narendra Modi government, domestic stock markets zoomed on Monday, gaining the most it has in a decade, and closing at a record high. While S&P BSE Sensex closed 1,421.90 points or 3.75% higher at 39,352.67, NSE Nifty 50 ended 421.10 points higher at 11,828.25, up 3.69%.

In the 30-stock Sensex, only two — Infosys and Bajaj Auto — ended in red, while IndusInd Bank, State Bank of India, Tata Motors, Yes Bank, L&T and HDFC all gained big. Of the sectoral indices on Nifty, all ended with gains, led by banking and financial stocks and realty. Market breadth remained positive, in favour of buyers.

"Expected stability and continuity in policy and increase in FII inflows are keeping markets positive. We are likely to see a revival of corporate performance from the second quarter. If exit poll predictions come true, it will be good for the economy, although markets are driven by sentiments in the short term," said Pradeep Gupta, co-founder & vice-chairman, Anand Rathi, said the markets.

Gautam Duggad, head of institutional equities, Motilal Oswal Financial Services, predicted that a stable government with a majority augurs well for reforms and policy perspective. "It removes a key overhang from the narrative — the potential of a hung verdict, or the formation of a third front government with no major national party at the helm," he said. "However, we do not see room for significant re-rating for markets given the underlying fair valuations (19x FY20 Nifty EPS) and continued earnings downgrades."

Paradise Regained

• Earlier this week, on May 14, the Sensex had just snapped a nine-day losing streak. The downward spiral was brought around by the escalating trade war between the US and China, while the Rupee also witnessed selling pressure against the US dollar
• But on Sunday, the exit polls predicted a BJP victory, and this was just the shot in the arm the markets needed, as it bounced back on Monday.
• While the stock markets posted their biggest single-day gains in over six years, the Rupee saw its best day in two months and government bond prices surged.