Poll results, steady crude bring cheer to markets; Sensex rises 817 points

A  combination of stabilising oil prices and strong showing of the Bharatiya Janata Party (BJP) in the elections of five states helped the indices post gains for the third day in a row. The Sensex jumped as much as 3 per cent, or 1,595 points, before it gave up half of the gains amid sharp losses in the European markets.

The benchmark gauge closed at 55,464, with a gain of 817 points, or 1.5 per cent. The Nifty, on the other hand, ended the session at 16,595, a gain of 249 points, or 1.5 per cent.

After touching $139 per barrel earlier this week, Brent crude prices have cooled off, helping boost investor sentiment towards domestic equities. On Thursday, Brent crude was trading at $122.6 per barrel.

Though crude oil is cheaper than what it was at the beginning of the week, it is trading at an elevated level that poses risks for India. This could impact the fiscal calculations of the Centre since the Economic Survey had estimated that the Indian economy would grow at 8-8.5 per cent in the next financial year (FY) on the assumption that crude prices would average at $70-75 per barrel.

The ruling BJP won in four out of the five states, including politically significant Uttar Pradesh. The win in UP has boosted the prospects of the BJP’s return at the Centre and is seen as a sign of policy continuity.

“Typically, state elections don’t change the course of markets too much. Given that BJP won, it has reimposed the belief that till 2024 there is no worry about the path of reforms.

If they had lost, there would have been a question mark on reforms for the next two years, and that way, it is marginally positive. The key worry for markets remains the Ukraine crisis. In the last two days markets globally have moved up as there are hints of reconciliation,” said Jyotivardhan Jaipuria, founder of Valentis Advisors.

Analysts, however, said the election verdict alone will not be able to offset the global headwinds.

The Russia-Ukraine war, the resultant surge in commodity prices, and fears of slowdown in global growth have led to a pullback in the equities market in recent weeks.

Equity investors are keenly watching the response and US Federal Reserve to the ongoing war. Russia’s invasion of Ukraine and the subsequent sanctions have led to further disruptions in commodity supply and global economic recovery. Investors are expecting a stimulus package from central banks to contain the economic fallout of the war.

However, policymakers face a tough balancing act between supporting the economic revival and controlling inflationary pressures.

“Inflation is going up even more because of the war. That means the US Fed is going to hike rates. There is going to be a lot of pressure on the margins. Earnings that were at a strong pace will be a struggle in the current and next quarters. RBI may be forced to hike rates if the commodity prices don't reverse,” said Jaipuria.

The market breadth was strong, with 2,423 stocks advancing against 941 that declined. All the sectoral indices gained. Fast-moving consumer goods (FMCG) stocks gained the most, with the sectoral gauge rising 2.7 per cent. Hindustan Unilever jumped 5.2 per cent, the most among Sensex components, followed by Tata Steel (4.3 per cent) and State Bank of India (3.7 per cent).  Tech Mahindra, Dr Reddy’s and TCS were the only three declining stocks in the index.