Benchmark indices logged their best gains in over three years as investors cheered exit polls, which predicted a comfortable majority for the BJP-led National Democratic Alliance.

Encouraging inflation data from the US and robust Indian GDP data for the quarter ended March also boosted sentiment, leading benchmark indices to record highs. The HSBC India Manufacturing Purchasing Managers’ Index fell to 57.5 in May from 58.8 in April, pointing to slower but healthy manufacturing activity.

The Sensex rose 2,507 points or 3.39 per cent on Monday to 76,468, while the Nifty climbed 3.25 per cent to 23263. Cash market volumes on the NSE were at ₹1.72-lakh crore. Nifty Bank rose 4 per cent to 50,979, a record. Nifty VIX cooled 15 per cent to 20.94.

PSU Banks, Infra, Realty, Energy and Oil & Gas rallied 5-8 per cent. Top Nifty gainers included Adani Ports (10.2 per cent), NTPC (9.1 per cent) and SBI (9.1 per cent).

The rupee rose to its highest level in over two months to 83.14 against the dollar, up 28 paise over the previous close. The benchmark 10-year government bond yields softened about 4 basis points to 6.95 per cent.

“The market responded positively to optimism about policy continuity and a development-driven agenda, following exit polls from the recent Lok Sabha elections, predicting a clear victory for the ruling party,” said Pranav Haridasan, MD and CEO at Axis Securities.

All eyes on FPIs

This continuity is key to maintaining a high economic growth trajectory and the ongoing impetus on infrastructure and capex investments, he said: “There’s an expectation that private sector investments, which have been low in recent years, will increase. Keeping these factors in mind, the market is expected to remain bullish and continue its upward growth trajectory.”

Pratik Gupta, CEO & Co-Head, Kotak Institutional Equities, said: “While the Nifty moved up sharply after the exit polls, some investors, especially the FPIs, are still waiting for the final results before they act. If the actual results are in-line with the predictions, there may be further upside in the short term.”

FPIs started the June series with highest net shorts in index futures of 2.97 lakh contracts as against net shorts of 53,500 contracts at the start of May expiry, according to analysts. On Monday, FPIs bought shares worth Rs 6,850 crore in the cash market, while domestic institutions bought shares worth Rs 1,913 crore, provisional data showed.

“We believe that the FPIs are likely to stage a comeback in the second half of the year due to steady economic growth, stable government, and a favourable macro-economic environment, with expected rate cuts by the central banks,” said Jayesh Bhanushali, Lead - Research, IIFL Securities.

The actual results will be declared on Tuesday. The RBI policy, the 100-day agenda, and Budget expectations will provide fresh cues this week.

Global equities edged higher after a report showing that inflation in the US is not worsening led a rally on Wall Street. Asian stocks ended in the green on Monday, led by Hang Seng, Taiwan Weighted and Kospi. European stocks rose and government bond yields dropped as investors anticipated an interest rate cut from the ECB later this week.

Related Topics