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Nachiket Kelkar
Nachiket Kelkar

MARKET WRAP

Markets surge as exit polls boost investors' sentiments

1-aug24 [File] Representative image

Exit polls forecasting a win for Prime Minister Narendra Modi-led BJP in the Gujarat assembly elections cheered market investors on Friday. The BSE Sensex jumped more than 200 points and the NSE Nifty50 index too was up over 80 points as strong buying was seen across select auto, pharmaceuticals and banking stocks.

The Sensex closed at 33,462.97, up 216 points or 0.7 per cent and the Nifty ended 81 points or 0.8 per cent higher at 10,333.25 points.

Over the week, the Sensex was up 0.6 per cent, while the Nifty gained 0.7 per cent.

Several exit polls released after the voting on Thursday, have predicted that the BJP will comfortably retain power in Gujarat, although the Congress is expected to win more seats than what it has over the last few elections in the state.

“A victory for the BJP will be received well by the market, while a surprise defeat (against the forecasts of the exit polls), would be a large negative surprise. In the former case, we see a modest rally and in the latter, a moderate correction as the market will also start focusing on India's weakening macro position,” said Sanjeev Prasad, co-head of Kotak Institutional Equities.

Sports utility vehicle maker Mahindra & Mahindra was the biggest gainer on Friday, the stock accelerated 3.6 per cent after it announced price hike across its portfolio from January.

Among other gainers, select banking stocks like HDFC Bank and Axis Bank also rose 2 per cent and 1.2 per cent respectively. Yes Bank surged nearly 4 per cent after the private sector lender said it will be included in the Sensex, which comprises top 30 companies, from Monday.

Pharma stocks also rose, with Dr Reddy's gaining 2.5 per cent, Lupin and Sun Pharma rising around 1 per cent.

Dr Reddy's has risen close to 9 per cent this week, after the pharma company said it had received establishment inspection report (EIR) from the US Food and Drugs Administration for its plant in Bachupally, Hyderabad. The plant, a key contributor to its US exports, had received several observations under form 483 earlier this year.

An EIR is typically issued to a facility, which the drug regulator may have earlier inspected, and is now closing the inspection.

India's markets have surged this year, amid huge inflows into domestic equity mutual funds, while foreign institutional investors too have been net buyers for 8 of the 12 months, taking their total equity investments so far in 2017 to Rs 54,153 crore. On the other hand, continued systematic investments by retail investors saw equity mutual funds register inflows of Rs 20,000 crore in November, taking the total inflows into equity funds to around Rs 1.2 lakh crore over April-November.

Many analysts are concerned over high valuations of India's equity markets, but don't see any big correction anytime soon, given that domestic liquidity is expected to remain strong and corporate earnings have started picking up.

“The whole rally is liquidity driven. Earnings last quarter were good. I think the worst of demonetisation and GST is behind us. We will see earnings pick up in the second half of the current fiscal year and that is giving legs to the market,” said Yogesh Nagaonkar, fund manager, Bonanza Portfolio.

He terms the current scenario as a “stock pickers market,” particularly, in the small and mid-cap space where the rally has been far ahead of the large-caps (BSE Sensex up 26 per cent in 2017 versus BSE MidCap index up 41 per cent) and one would have to look out for selective opportunities in the space, he added.

Kotak's Prasad too flagged off valuation concerns and said there were risks to multiples particularly if the domestic macro-economic conditions were to worsen further due to rising inflation and crude oil prices and if global macro conditions became less favourable.

“We do not like the absolute valuations of the bulk of the market with most of the consumption stocks trading at rich valuations,” Prasad added.

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Topics : #BSE | #NSE | #Nifty | #sensex

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