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After a brief correction intra-day, markets staged a recovery amid institutional buying in infrastructure, oil and gas stocks on hopes that the new government will announce reforms in both these sectors to boost economic growth.
At 2:35PM, the 30-share Sensex was up 242 points at 24,364 and the 50-share Nifty was up 59 points at 7,262.
Foreign Institutional Investors were net buyers in Indian equities to the tune of Rs 3,634 crore on Friday, when the BJP-led NDA won the general elections by an absolute majority.
The Indian rupee surged to its highest level in 11 months against the dollar on expectations of continued robust foreign buying in domestic shares and debt following the historic win by the BJP-led NDA in the general elections.
Asian markets were generally trading lower with China's Shanghai Composite down over 1%. Japanese shares ended lower amid a stronger yen and tracking weakness in Chinese shares. The Nikkei ended down 0.6% at 14,006. Meanwhile, Hang Seng and Straits Times were trading flat with negative bias.
European markets were trading lower as investors booked profits after recent gains adopting a wait-and-watch stance ahead of the European Central Bank's policy meet in June. The CAC-40, DAX and FTSE-100 were down 0.2-0.8% each.
The BSE Power index was the top gainer among the sectoral indices up 8.3% followed by Capital Goods, Bankex, Metal, Auto , Oil and Gas index up 0.8-7.3% each.
Infrastructure stocks were among the top gainers on hopes that the government's top priority would be to resume large infrastructure projects that are currently stalled. L&T was up nearly 7% at Rs 1,522.
State-owned BHEL was up nearly 15% at Rs 264. The company today said it has signed an initial agreement with PT Star Vyobros, Indonesia for setting up a 200 MW coal fired plant in the island nation.
In the oil and gas space, the upstream industry is hopeful of that the new government would take a serious look at the subsidy sharing formula.
"The UPA II government was close to implementing this (proposing US$65/bl net realisation for ONGC/OIL). The NDA government might choose to implement this by 2Q FY15, after taking stock of OMCs' under-recovery trends," said ICICI Securities said in a report.
The industry also awaits clarity on E&P reforms and expects the government to stick to Kelkar committee recommendations of continuing with the cost recovery mechanism. ONGC was up 8% while index heavyweight Reliance Ind was up 3.2%.
Coal India was up 11%. According to a report by a foreign brokerage, reform of Coal India would be on the agenda of the new government. The company will announce its results for the year ended March 31, 2014 on May 29, 2014.
Bank shares also witnessed buying on hopes that resumption of economic activity would lead to higher credit growth. HDFC, HDFC Bank, Axis Bank and SBI were up 3-5% each. ICICI Bank which had seen sharp gains last week was trading flat.
Meanwhile, shares of IT exporters such as TCS, Infosys and Wipro were down 4-7% each after the rupee touched a 11-month high against the US dollar. Over 80% of their revenues come from exports to the US and an appreciation in the Indian rupee hurts revenues.
Defensive shares in the pharma and FMCG space witnesed profit taking with focus shifting to cyclicals. Dr Reddys Labs, Sun Pharma and Cipla were down 4.5-5.5% each. In the FMCG space, HIndustan Unilever was down 3% and ITC lost nearly 4%.
Among other shares, Rail stocks have surged on hopes that Bhartiya Janta Party's Prime Minister designate, Narendra Modi will stand by his promise to improve the Indian Railways. Texmaco Infrastructure & Holdings, Kernex Microsystems (India), Kalindee Rail Nirman (Engineers), BEML,Titagarh Wagons , Nelco, Stone India, and Zicom Electronic Security Systems have gained 5% - 20% each.
In the broader market, the BSE Mid-cap index was up 3.6% and the Small-cap index was up 5.1%.
Market breadth was strong with 2,003 gainers and 726 losers on the BSE.
