Sensex, Nifty record new highs on FII buying ahead of election results
Sensex rises as much as 0.74% to 22,795.58 points, while the Nifty gains as much as 0.68% to 6,825.45 points
Mumbai: India’s benchmark stock indices recorded new highs on Monday, as foreign institutional investors (FIIs) continued to buy local stocks ahead of the results of national elections in the world’s largest democracy, even though the pace of buying has slowed down.
Results for the elections, which are currently underway, will be announced on 16 May.
According to dealers, there was a lot of short-covering as well, along with buying from long-only investors, ahead of the expiry of monthly derivative contracts on Wednesday, a day before the usually scheduled last Thursday of the month.
The stock markets are closed on Thursday, as Lok Sabha elections will be held in Mumbai.
“Early expiry and FIIs’ long build-up in Bank Nifty led the market higher, which is likely to continue during the week considering the short expiry tenure," said Vinod Nair, head of fundamental research at Geojit BNP Paribas Financial Services Ltd.
In April, FIIs have bought a net of $718.4 million in equities. In the previous month, FIIs had bought $3.7 billion in stocks.
FIIs have pumped in a net of $4.8 billion in Indian shares so far in 2014. Over this period, the Sensex has risen 7.5%.
On Monday, the 30-share S&P BSE Sensex rose as much as 0.74%, or 166.74 points, to 22,795.58 points, while the National Stock Exchange’s 50-share CNX Nifty gained as much as 0.68%, or 46 points, to 6,825.45 points, new all-time highs for both indices.
The Sensex closed 0.6%, or 135.99 points, higher at 22,764.83, while the Nifty ended 0.56%, or 38.25 points, up at 6,817.65, fresh closing highs for both indices.
“The market has been rising on hopes that we could see BJP-led NDA (National Democratic Alliance) at the Centre with a strong win. These expectations have been dominating all other factors in the market for now. People believe the worst is over for the economy, and good times are not far away," said Raamdeo Agrawal, joint managing director of Motilal Oswal Financial Services Ltd.
“I think market may see an upside of 20% if there is a landslide victory for NDA. On the other hand, if we land up in a situation of chaos—a situation of a hung Parliament, a 20% decline in the market is not ruled out," said Agrawal
Director of Ambit Investment Advisors Pvt. Ltd Vaibhav Sanghavi agreed.
“If the election results come in as per Street expectations, we could be in bull run for 3-5 years. However, if it is completely off what the expectations so far have suggested, we could see a sharp correction," said Sanghavi.
The S&P BSE Small-cap index and S&P BSE Mid-cap index have risen 16.4% and 10.3%, respectively, outpacing the benchmark indices.
According to Sanghavi, FIIs are betting on mid-cap and small-cap stocks on anticipation that a pick up in the economic cycle will benefit such companies.
“Selling in mid-cap and small-cap space has waned. There is a strong sentiment that bad times will not return to the market anytime soon," said Agrawal of Motilal Oswal.
Meanwhile, the earnings season for the March quarter has set in, and the numbers have not been disappointing so far.
“Nifty is likely to continue on its momentum aided further by Q4 results outcomes in the coming weeks," said Nair of Geojit BNP Paribas.
While Tata Consultancy Services Ltd and HCL Technologies Ltd performed well and forecast a better outlook for the current fiscal, the management of Infosys Ltd and the IT business of Wipro Ltd were not that sanguine, suggesting that both these companies will take a longer time to work around client and leadership issues.
However, all of these companies reported forecast-beating profits for the March quarter.
“Hardly a few companies have reported earnings, and they have been in line. The good part is that there are no big negatives," said Sanghavi of Ambit.
Energy major Reliance Industries Ltd reported a marginal rise in its March quarter earnings, helped by better-than-expected refining margins and a weaker rupee that boosted export earnings.
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