It was like a roller-coaster ride for investors on Monday, with the benchmark BSE Sensex swinging 1,200 points through the day; falling sharply early on, only to recover and settle firmly in the green.
Early trends from Gujarat election results had showed Congress party leading, and that sent the Sensex crashing over 800 points as nervous investors started selling shares. However, as it soon became clear that BJP would retain power in Gujarat, and also win in Himachal Pradesh, markets recovered, at one point Sensex even surging over 300 points.
The Sensex finally settled at 33,601.68 points, up 139 points or 0.4 per cent. It was a similar story for the NSE Nifty50, which closed 56 points or 0.5 per cent higher at 10,388.75 points.
Analysts said that investors were relieved with BJP winning both the states, particularly so in Gujarat, which was a big test for Prime Minister Narendra Modi himself.
“Equity markets underwent very volatile session after seeing sharp dip of around 2 per cent points in the morning trade, before the final outcome of Gujarat elections. As the vote count came in the favour of BJP, indices staged very smart and fast recovery,” said Anita Gandhi, whole time director at Arihant Capital Markets.
Select banks, automobile companies and pharma stocks were among the major gainers in Monday's trading.
Among auto stocks, Mahindra & Mahindra accelerated 2.7 per cent, Maruti Suzuki gained 1.6 per cent and two-wheeler majors Bajaj Auto and Hero MotoCorp rose around 1 per cent.
Elsewhere, State Bank of India and ICICI Bank were up around 2 per cent; Sun Pharma also rose 2 per cent and Dr Reddy's Labs gained 1 per cent.
Analysts feel that the election win, despite a lot of anger among sections of the society following demonetisation and the rollout of Goods and Services Tax, will embolden the ruling BJP-led government to continue with its reforms process going ahead.
“BJP's vitory in Gujarat after overcoming 22 long years of so called anti-incumbency is particularly significant...This would reinforce government's resolve to roll on reforms juggernaut, benefiting the economy and the markets,” said Ajay Bodke, CEO at Prabhudas Lilladher.
Some, however, feel that some populist measures can't be ruled out, given the closely fought battle in Gujarat and the lower number of seats won compared with 2012.
“Given the election calendar remains heavy in 2018, we expect some shades of populism to emerge next year, with a focus on polices with both economic and political benefits,” said Sonal Varma, chief India economist at Nomura Securities.
