Sensex surged over as 800 points in opening trade on Monday to cross an all time high level of over 68,000, bolstered by the Bharatiya Janata Party’s massive victories in state elections ahead of the 2024 Lok Sabha polls. Nifty50 scaled fresh highs of 20,550, up over 1% in trade as the market cheered prospects of a stable Narendra Modi government returning to power in the 2024 general elections.
BJP’s better-than-expected performance in the recent state polls in Rajasthan, Madhya Pradesh and Chhattisgarh has raised hopes for a clear mandate in the upcoming Lok Sabha elections. This success could potentially contribute to the continued bull run in the Indian equity market, which has been resilient against global geopolitical concerns due to the anticipation of consistent government commitment to structural reforms promoting economic growth.
However, as with any rapid surge in financial asset values, there is a possibility of short-term corrections in the broadest gauges due to stretched valuations in certain sectors.
“The state election results reaffirm the expectation of the BJP’s strength, and this trend is likely to continue in the general elections as well,” Rushabh Sheth, Co-CIO at Karma Capital Advisors told ET. “This is a positive indicator because the markets favor continuity and stability.”
The BJP’s convincing victories in the states of Chhattisgarh, Rajasthan, and Madhya Pradesh, which collectively contribute 65 lawmakers to the lower house, have solidified market expectations of a strong popular mandate for the ruling party in the 2024 Lok Sabha elections. These electoral wins have also bolstered investor confidence in the government’s growth-oriented reform agenda, particularly in capital-intensive industries like infrastructure and power.
According to Sandeep Raina, Executive Vice President-Research at Nuvama Professional Clients Group, the election results are very promising for the markets as they offer greater stability in terms of government and its policies, as well as a positive stance on investments in infrastructure and renewable energy.
This election outcome also alleviates concerns about voter dissatisfaction with the ruling party. With the BJP winning in Madhya Pradesh, Chhattisgarh, and Rajasthan, the probability of the party winning more seats in the general elections is high. In addition to Uttar Pradesh and Gujarat, which are strongholds for the BJP, the chances of winning more seats in the parliament are also high, added Raina. These five states account for approximately 200 seats in the Lok Sabha.
Foreign investors have already shown increased interest in the Indian market, with a drop in US bond yields, a weaker dollar, and a decrease in crude oil prices prompting FPIs to reduce their bearish bets on the Nifty. In November, they turned into net buyers, investing Rs 9,000 crore in Indian stocks after selling off risk assets in the previous two months.
Niket Shah, fund manager at Motilal Oswal Asset Management predicts a potential rally of 5-7% in the market in the coming days, supported by favorable global market trends. Since October 26, the Sensex and Nifty have already experienced a jump of approximately 7.5% following a month-long decline from their previous all-time highs.
Brokers suggest that the momentum is currently in favor of bullish investors, although caution may be warranted in the face of sharp market movements.
