Benchmark indices rebounded on Wednesday on hopes of political stability as the NDA government is likely to come back to power for the third term.
The Sensex closed 2,303 points, or 3.2 per cent, higher at 74,382, while the Nifty settled 735 points higher at 22,620. Cash market volumes on the NSE continued to be high at ₹1.87-lakh crore. The Nifty Midcap 100 index rose more than the Nifty even as the advance decline ratio rose sharply to 3.49:1.
All sectors ended in green, with FMCG, auto, private banks, and metals up 4-5 per cent. The expectation of a healthy monsoon is driving buying interest in FMCG and auto stocks, said analysts. Adani Ports and IndusInd Bank were the top Nifty gainers, up 8.5 per cent and 7.8 per cent , respectively.
FPIs sold shares worth ₹5,656 crore on Wednesday, while domestic institutions bought ₹4,555 crore shares.
Ashish Gupta, CIO, Axis Asset Management, said, “The NDA has secured a third term, and this indicates another five years of political stability. We expect the markets will keenly watch the economic policy of the government, such as the budget and the government’s 100-day plan.”
Kotak Institutional Equities expects the ‘new’ government to continue with its investment-led economic agenda but tweak its priorities to support consumption and employment.
“We will get a better sense of the same over the next few weeks and in the FY25 final budget. The government may continue with its focus on affordable healthcare and housing, energy transition, infrastructure development, and manufacturing. The government has already executed the bulk of the required reforms for incentivizing private investments, and their execution will be more material,” the brokerage said in a note.
Gupta expects cyclical tailwinds will continue to be strong for sectors such as industrials, infrastructure, including power, locally focused manufacturing, and utilities. Structural themes like financials and consumption should also be on a strong footing.
“With political uncertainty behind us, the private sector may now start implementing their plans. The capex cycle is already turning around, and government-related infrastructure spending should get a boost. The real estate sector is also seeing a significant upturn. We expect the focus to be back to companies and their earnings potential, which are the backdrop for India’s long-term growth story,” said Gupta
Nifty could now head towards 22858 and 23180 on the upper end, while 22319 could offer support in the near term. The narrative around government formation and RBI monetary policy will take centre stage in the near term.
Asian stocks were mixed on Wednesday, as a softening US labour market firmed up bets of a Federal Reserve interest rate cut in September and investors awaited a crucial payroll report later this week. European stocks rose slightly on Wednesday as investors looked ahead to Thursday’s ECB meeting.