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The benchmark BSE Sensex and National Stock Exchange (NSE) Nifty touched record highs on Friday, as market participants stepped up bets on expectations of a stable government coming to power when election results are declared next Friday.
Dealing room buzz suggested leaked exit poll data pointed to a clear majority for one of the alliances, triggering Friday’s rally.
The S&P BSE Sensex rose 650.19 points, or 2.91 per cent, to close at 22,994.23, after touching an intra-day high of 23,048.49. The CNX Nifty closed at 6,858.80, an all-time high. For the Sensex and the Nifty, the previous closing highs were 22,876.54 and 6,840.8, respectively (on April 23).
The value of trades executed on Friday was more than twice the average of the previous two weeks. The turnover stood at Rs 1.78 lakh crore, compared with the daily average turnover of Rs 90,373 crore in the last fortnight. Since the Lok Sabha elections began on April 7, investor wealth has risen by Rs 1.99 lakh crore; during this period, total market capitalisation rose from Rs 75.54 lakh crore to Rs 77.54 lakh crore. “The rally has been on the back of expectations of a stable government; it is likely to continue. Also, foreign institutional inflows are expected to be strong,” said Nirmal Jain, chairman of India Infoline.
The NSE’s volatility index, India VIX, rose 9.93 per cent to close at 37.7, its highest close since August 25, 2009.
Andrew Holland, chief executive of Ambit Investment Advisors, said, “People seem to be getting optimistic ahead of the election results…There are expectations problem sectors are turning around and sectors such as banking are sensitive to how the economy is doing.”
On Friday, of BSE’s 12 sectoral indices, 10 closed in the green. The banking index recorded the best performance, rising 5.34 per cent. It closed at 15721.36, its highest close since May last year. Indices tracking the real estate and power sectors rose 4.38 per cent and 4.12 per cent, respectively. Those tracking the consumer durables and health care sectors lost 0.03 per cent and 0.56 per cent, respectively.
For every two stocks that ended with losses on BSE, there were about three advances. ICICI Bank, HDFC Bank, Reliance Industries, HDFC and Larsen and Toubro contributed 400 points to the surge in the Sensex.
The rise was amid muted global cues. European markets closed in the red. All other Asian markets recorded gains of less than one per cent; the only exception was the Philippines market (up 1.21 per cent).
Ramesh Damani, member, BSE, said this Friday’s rally might be part of a larger upside trend in the market.
"Rather than attributing it to hopes of an NDA (National Democratic Alliance) victory, which is probably partly true, this is also in the nature of how equities behave in the early phase of a bull market.
The market may do nothing for a few days and then wipe out multiple days of losses on a single day," he said. "There is fear technology and pharmaceuticals will be affected by the depreciation in the rupee and there are expectations of an investment cycle revival."
Sun Pharmaceutical Industries, Tata Consultancy Services and Dr.Reddy's Laboratories were the only Sensex stocks to end marginally in the red, down less than one per cent. ICICI Bank was the best performing of the 30 Sensex stocks, gaining 6.63 per cent to close at Rs 1,374.85.
Provisional exchange figures showed foreign institutional investors were net buyers by Rs 1,268.78 crore, while domestic institutions were net sellers by Rs 75.3 crore.
