Indian Equity Markets Surge to Record Highs as Exit Polls Predict Strong Return of Modi Government

In a historic opening on Monday, Indian equity benchmark indices BSE Sensex and Nifty50 surged to lifetime highs, driven by exit polls forecasting a landslide victory for Prime Minister Narendra Modi's BJP-led National Democratic Alliance (NDA) in the Lok Sabha elections. The BSE Sensex soared above the 76,000 mark, while the Nifty50 breached 23,100, reflecting investor optimism about a stable and pro-growth government.

Most exit polls have predicted a decisive majority for the NDA, with some suggesting that Modi’s ambitious '400 Paar target might be surpassed. This sentiment has spurred a bullish market reaction, with both indices experiencing nearly a 3% increase by mid-morning. At 11:37 AM IST, the BSE Sensex was trading at 76,117.49, up by 2,156 points, and the Nifty50 was at 23,183.35, up by 653 points.

Market Dynamics and Key Performers

Motilal Oswal Financial Services emphasized its focus on key domestic cyclical themes, maintaining an overweight stance on financials, consumption, industrials, and real estate. Analysts have highlighted the potential for a rally in stocks benefiting from Modi’s policies, dubbed "Modi stocks," including sectors such as defense, infrastructure, and energy. Companies like Larsen & Toubro, NTPC, and the Adani Group saw significant gains, with Adani Group stocks alone adding Rs 1.4 lakh crore in market capitalization.

However, the market’s enthusiasm is tempered by recent economic data. India’s manufacturing PMI for May fell to a three-month low of 57.5 due to a severe heatwave impacting production. Despite this, factory activity remains robust, supported by strong international sales.

Investment Strategy and Market Outlook

Ajit Mishra, SVP of Research at Religare Broking, suggests a cautious approach amidst the current volatility. He recommends monitoring leveraged positions and focusing on short-term bullish bets in companies like Bajaj Auto, Britannia, and HDFC Bank, while advising a bearish stance on stocks such as Apollo Tyres and Titan.

Foreign portfolio investors (FPIs), who held significant bearish positions in index futures, are expected to reduce these bets, potentially driving further market gains. Abhilash Pagaria of Nuvama anticipates significant index short-covering, which could push the Nifty up by 700-800 points in the coming days.

Economic Indicators and Future Projections

Friday’s GDP data showed a robust 8.2% growth for FY24, reinforcing India’s position as the fastest-growing major economy. Additionally, S&P’s upward revision of India’s rating outlook and better-than-expected GDP figures provide a strong fundamental backdrop for the market.

As the election results loom, heightened volatility is expected. While markets have largely priced in a Modi victory, any deviations could lead to sharp corrections. Nonetheless, the prevailing sentiment remains positive, with analysts projecting substantial gains if the final results align with the exit polls.

The Indian equity markets are poised for a significant rally driven by political stability and strong economic fundamentals. Investors are advised to stay vigilant, manage risks, and focus on sectors likely to benefit from continued pro-growth policies under the Modi administration.

Source: The Times of India