Markets set to touch record highs after BJP’s UP victory

Growth in IIP data for January may also boost markets, though investors will also watch inflation numbers and FOMC decision on rate hike


Markets may have a bull run after the BJP’s landslide victory in Uttar Pradesh elections. Photo: Mint
Markets may have a bull run after the BJP’s landslide victory in Uttar Pradesh elections. Photo: Mint

Mumbai: The markets are poised to touch record highs this week after Bharatiya Janata Party’s (BJP) landslide victory in Uttar Pradesh elections.

Though there is a liquidity splurge, the markets have not seen record highs which they reached last in 2015. Analysts said that the exuberant markets had already factored in a BJP win in the crucial state but the unexpected vote share of Prime Minister Narendra Modi-led party in UP is what will further excite the bulls.

Dharmesh Kant, vice-president-head, retail research, Motilal Oswal Securities, said, “FIIs (foreign institutional investors) who were on the sidelines will participate in the markets now. The Nifty will see record high, rising 100 points on Tuesday itself.” The Nifty had recorded a new high at 9,119 points in March 2015.

Another positive factor that may trigger market rally is revival in factory output as index of industrial production (IIP) rose 2.7% in January, much better than contraction of 0.1% in December. “On a cumulative basis, growth so far is just 0.6% for the first 10 months, and we expect growth to move towards 1-2% for the entire year. It will be propped up by consumer goods and basic goods—the latter being driven by the government to a large extent,” said credit rating agency Care Ratings.

Retail and wholesale inflation for February will be announced on 14 March, which will give a better indication of economic growth in the country.

Later in the week, the markets momentum may shift focus to global events. Investors are expected to focus on Federal Open Market Committee’s (FOMC) decision on whether to raise interest rates and its commentary on how quickly the central bank will tighten monetary policy. The FOMC meet is on 14-15 March. Strong US employment growth of 235,000 in February is indicating a rate hike this time.

Jimeet Modi, chief executive officer, SAMCO Securities, however, said it is a “non-event” for India. “Indian markets may react negatively if Fed raise interest rates but it will be for very short term,” he said.

Meanwhile, the Euro zone disintegration may hurt the pound further. On Monday, UK parliament gave its nod to prime minister Theresa May to begin UK’s European Union exit. Soctland has demanded a new independence referendum within two years to stop it from bring pulled out of the European Union.

Among commodities, crude oil continues to fall, after hitting three-month lows, on high US production and oversupply.

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