NEW DELHI: India’s equity market is expected to see one of its biggest gains of recent times this week following the exit poll results, which have erased all concerns related to the change of power at the centre.
According to market experts, as there are now indications that the Prime Minister-led NDA alliance will win more than 350 seats in the Lok Sabha elections, the bulls are expected to go on a major buying spree on Monday.
Market experts believe the headline indexes will scale to new peaks this week after a choppy streak last week. Sensex and Nifty ended the week down nearly 2% at 73,961 and 22,531 as investors preferred to play safe ahead of the D-Day.
“Exit polls results which indicate a clear victory for the NDA with around 360 seats completely removes the so-called election jitters which have been weighing on markets in May. This comes as a shot in the arm for the bulls who will trigger a big rally in the market on Monday,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Vijayakumar adds that large caps in financials, capital goods, automobiles and telecom are likely to lead the rally on Monday. The bulls will be further emboldened by the better-than-expected 8.2% growth in GDP numbers which came after market hours on Friday.
Gaurav Dua of Sharekhan by BNP Paribas said that if the ruling coalition is able to cross the 350 mark again, it would be taken quite positively by the market. “It would essentially mean a stable government with continuity in the policy framework. We expect public sector companies along with engineering, power, banks to lead the rally on Monday. Also, there could also be short covering by foreign investors which would further add to the party on the Street,” added Dua.
Analysts, however, are also cautious that the final seat tally could be a little different on Tuesday, as the exit polls have predicted. They have also hinted at profit booking after a rally.
“The fact that the BJP could return to power is good for continuing and accelerating the reform process. This outcome was mainly on the expected lines. Hence, markets may, after the initial excitement, wait out for the new path set out by the latest government. If the NDA does not get 400+ seats, some fundamental reforms requiring constitutional amendments may be challenging to implement, but there is still a lot that can be done with this kind of majority,” said Dhiraj Relli, MD & CEO, HDFC Securities.
Besides equities, government-backed security bonds and local currency are also expected to see a rally. “We expect the Nifty to reach approximately 23,200-23,300 levels during this period. Additionally, we foresee the India 10-year yield reaching 6.9% and the Rupees appreciating to 82.75,” said Amit Goel, Co-Founder & Chief Global Strategist, Pace 360.
Goel, however, said in the longer term, they continue to believe that Indian equities represent the biggest bubble in the history of world equity markets. “We expect the Nifty to correct down to 18,000 levels by October 2025,” added Goel.