Demolishing general election 2024 outcome-related jitters, India's equity market made stellar gains on Thursday.
The benchmark indexes -- BSE Sensex and NSE Nifty -- closed the session with a gain of more than 1.6% each after hitting fresh peak levels. Nifty50, which almost touched the 23,000 level, closed the session at 22,967.65, up 1.63%. It hit a fresh high of 22,963.60 on Thursday. The 30-share Sensex hit a high of 75,500 before settling at 75,418, up 1.61%.
"The Nifty hitting a new record is the market's message of political stability after the elections. The rally is healthy since it is led by fairly valued large-caps," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
The Reserve Bank of India's (RBI) announcement of a record ₹2.11 lakh crore dividend to the Centre for FY24 also boosted sentiments. Market experts believe this is akin to an indirect rate cut and is expected to reduce bond yields.
"This development is a significant macroeconomic positive for the market, with direct implications for the fiscal deficit and bond yields. The infusion of funds is akin to an indirect rate cut for the economy, as it is expected to lead to a reduction in bond yields. Since many investment instruments are linked to government bond yields, this reduction will likely have a broad positive impact across the financial markets. The improved fiscal position could also prompt upgrades in India's economic outlook," said Santosh Meena, Head of Research at Swastika Investmart.
Meena added there is now an anticipation that Foreign Institutional Investors (FIIs) may shift to buying, which would provide additional support to the market. Looking ahead, the Nifty index may witness further expansion and an immediate target of 23,000 is in sight, with the possibility of reaching 24,000 as the election outcome approaches, he added.
Adani stocks have an outing to remember
The three heavyweights -- HDFC Bank, Reliance and ICICI Bank -- were the major contributors to Nifty's rally.
The other top gainers were Adani Enterprises, Adani Ports, Mahindra & Mahindra, L&T, Axis Bank and Eicher Motors. All Adani Group stocks closed in green and registered gains between 1% and 8% amidst reports that the flagship company -- Adani Enterprise Ltd (AEL) will replace Wipro in the Sensex index.
In the broader market, the BSE Midcap and Smallcap indices also hit their fresh record highs of 43,442.47 and 48,229.33 respectively during the trading session. The total market capitalisation of the firms listed on BSE rose to nearly Rs 420 lakh crore from Rs 416 lakh crore in the previous session, making investors wealthier by about Rs 4 lakh crore in a day.
Bernstein Research in its latest India Strategy report said that a tally of around 330-350 seats for the Bharatiya Janata Party-led NDA government in the ongoing Lok Sabha elections could trigger a short-term rally in stock markets with the benchmark Nifty index breaching the 23,000-mark post-elections. This event, according to Bernstein, will be followed by profit booking as the market adjusts to the realities of execution and valuations.
The financial research firm, however, stated that heavy profit-booking will take place in the near term with the possibility of low or no returns this year for the markets if the Congress-led INDIA bloc government forms a government at the Centre.
The sixth phase of the Lok Sabha election 2024 is scheduled for May 25 followed by the final phase on June 1. Election results will be declared on June 4.
