The National Stock Exchange (NSE) 50-share CNX Nifty ended at 7108.75 on Wednesday, unchanged from the previous session's closing level after nine years. Earlier on June 1 2005, the benchmark index had closed unchanged at 2,087.55 points.
In the history of NSE, only in five times has the benchmark index closed unchanged – on October 4 2002 it closed at 948.20, in January 15 2001 (1,286.75) and in June 19 1997 (1,159.80), according to data compiled by the Business Standard research bureau.
Surprisingly, in past two occasions (2002 and 2005), the benchmark index rallied more than 40 per cent in next one year. In 2002, Nifty had surged 53% from 948 to 1,449 and gained 42% to 2,962.25 in June 2006.
In both these periods, Reliance Industries (RIL), Mahindra and Mahindra (M&M), Bharat Heavy Electricals Limited (BHEL), Larsen and Toubro (L&T) and Tata Motors rallied more than 70% in next one year, the Bloomberg data shows.
So, what’s in store for the Nifty now?
Nifty has rallied almost 35% or 1,831 points to 7,116 from its August low of 5,285 on the back of expectations of a stable government at the centre. The up move gained further momentum closer to the outcome of exit polls.
The outperformance has been led by cyclical sectors — with banks, capital goods, oil and gas gaining the most. Healthcare and information technology (IT) remained under pressure on the expectations of currency appreciation.
Deepali Bhargava analyst at Espírito Santo Investment Bank Research remain cautiously optimistic on the recent exuberance seen post the exit polls.
“Analyst thinks a positive election outcome could further drive both business confidence and the market ahead of fundamentals. A stable government is surely a positive as political instability is frowned upon by global capital and captains of industries as it doesn’t provide clarity on future economic policy, adversely impacting investment and, consequently, physical capital accumulation,” she says.
Points out R Sreesankar, head – institutional equities, Prabhudas Lilladher: “The strength in the market is indicating the likelihood of a deceive mandate for one of the alliance in the general elections. We believe the market is likely to move up further over 7,300 (Nifty) should the any of the alliances have majority. On the contrary, should we have a fractured mandate, the current euphoria and over expectation could turn the market into a tail spin and we could see a sharp correction of around 10% in the near-term and over 15% in the medium-term.”
“Given the current view from the exit polls, we expect to see the market at 7,300 levels in the near-term and should the policies and budgets be as per market liking, we expect to see the Nifty at 7,500 levels for the next three months or so,” he adds.
