Sensex hits 40,000 but ends lower after nearly 1,500-point swing6 min read . Updated: 23 May 2019, 04:03 PM IST
- The Nifty also hit a new milestone of 12,000 before succumbing to profit-taking
- IT, metal and FMCG stocks led the decline today
Indian markets ended lower today in a session marked by wild swings. In early trade, the Sensex surged as much as 1,014 points to set a new intra-day high of 40,124 after early trends showed Prime Minister Narendra Modi is set to return for another term. But later it succumbed to profit-taking amid weak global cues, before ending the day nearly 300 points lower at 38,811. At day's low, the Sensex fell to 38,651, down nearly 1,500 points from its intraday high. The Nifty ended 0.70% lower at 11,657, down significantly from its day's high of 12,041. Latest trends show BJP-led NDA is set to come to power with around 350 seats.
'Markets were initially enthused to see the election results falling in line with the exit polls. However, the run up to the D–Day was so sharp that, it turned out to be a sell on news phenomenon. Participants would now be keen to know the future course of action for bringing the economy back on track, solution to the liquidity situation, the Union budget, the progress of monsoon and, most importantly, the earnings trajectory," said
Devang Mehta, head of equity advisory at Centrum Wealth Management.
"International factors like behavior of crude prices and the progress of US-China trade war resolution would also be the key monitorables," he added.
IT, metal and FMCG stocks led the decline today. Among the Sensex stocks, Vedanta fell 5% while Bajaj Finance, Tata Motors, HDFC Bank and ITC declined between 2% and 4%.
"From a risk-reward point of view, the market is delicately balanced. The direction of the market will depend on the steps that the government takes to accelerate growth," said Nilesh Shah, MD & CEO of Kotak Mutual Fund.
"Together we grow. Together we prosper. Together we will build a strong and inclusive India. India wins yet again," tweets PM Modi, as BJP-led NDA heads for a bigger victory than 2014.
The Sensex hit the historic milestone today as Prime Minister Narendra Modi is set for a second term with a comfortable majority. Morgan Stanley has a Sensex target of 45,000 by June 2020, an upside potential of more than 10% from current levels. “The ongoing trends suggest that there will be continuity in administration. This means the equity markets can predict policy. India's policy certainty index relative to the world which was threatening to roll over could now make fresh peaks," Morgan Stanley said.
Rusmik Oza of Kotak Securities says consumption stocks may take a "back seat because of the slowdown in demand and rich valuations."
"Based on our reading of BJP’s manifesto and interim budget, we feel capital goods, construction, building materials, corporate banks, power equipment, housing finance companies could benefit the most in the next one year," he added.
"We see more value and upside in the mid and small-cap space hereon. With NDA coming back into power we can expect local investors to take comfort in the mid and small cap space with a longer 2-3 year horizon and inflows could resume in them," said Rusmik Oza, head of fundamental research at Kotak Securities.
"Nifty and Sensex tested 12,000 and 40,000 mark today. Based on the leads it is evident that NDA is coming back with likely single majority for BJP. Valuation wise Nifty at 12,000 trades at 19 times on forward PE basis. Hence we see limited upside potential in the Nifty in the near future," says Rusmik Oza, head of fundamental research at Kotak Securities.
B Gopkumar, ED and CEO of Reliance Securities, says he expects India allocation from foreign investors to go up. "Markets were looking for stability, continuity and strong leadership rather than a fractured mandate - this has led to the new high. We believe India allocation from global funds will increase and more ETF flows are likely over the short term that could drive the markets even higher," he said.
"The thumping victory for BJP surpassing its winning tally of 2014 (latest trends) has pleasantly surprised even the bulls. The risk-on sentiment in the market is quite evident. The continuation of policies and reforms is an added comfort. Post political outcome, going forward the narrative should come back to economy and earnings," said Jagannadham Thunuguntla, research head at Centrum Wealth.
Sanjiv Bhasin, executive vice president of IIFL Securities, said in the short term the Nifty can add another 300 points. But from here on midcap stocks are likely to outperform to the end of the year as markets expect liquidity infusion and reforms from the new government.
India's 10-year bond prices hit a 13-month high today after latest trends showed NDA leading in over 300 seats. The 10-year bond yield was at 7.201%. Bond prices and yields move in opposite directions.
Shares of Bank of Baroda were up 14% in pre-noon trade. The PSU lender on Wednesday reported a narrower loss for the March quarter. Bank of Baroda Wednesday reported a standalone net loss of ₹991 crore for the quarter ended March on account of higher provisioning for bad loans.The lender had reported a net loss of ₹3,102 crore in the same period last year.
Ex-IL&FS, IndusInd Bank (IIB) posted strong core performance in Q4 FY19. Edelweiss has maintained buy on the stock. "The bank continues to deliver sustainable earnings growth (a better mix) and strengthen its liability franchise. In spite of concerns around stressed groups, we believe earnings accretion from the merger and superior growth and improved revenue traction post-consummation of the merger will drive earnings trajectory," the brokerage said. IndusInd Bank shares were trading 7% higher at ₹1,626, following 5% gains on Wednesday.
Banking stocks led the gains with Nifty Bank index rising over 2%. IndusInd Bank and Bank of Baroda surged nearly 6% each while SBI, PNB, Yes Bank and ICICI Bank were up 3% to 4%. "Continuity at the center is beneficial to continuity in policy formulation and execution, notwithstanding the challenges of stabilising liquidity and softening impact of credit dislocation on NBFC/developers, which may require deeper involvements from RBI/government. Large banks are still a lot less impacted," said Jefferies India in a note to its investors.
The rupee today strengthened to 69.41 a dollar, up from its previous close of 69.67. The Indian currency opened at 69.50 a dollar. The currency has gained in eight out of 10 trading sessions.
Bond prices also rose as the 10-year bond yield softened to 7.235%, compared with Wednesday's close of 7.26%. Bond prices and yields move in opposite direction.
The markets are pricing in a clear victory for the NDA government, says Jayant Manglik, president of retail distribution at Religare Broking. Going forward in the medium term, we expect the markets to consolidate post the election outcome as focus would shift back to fundamentals (corporate earnings) and global cues which has been volatile due to re-escalation of trade tensions between US–China, he said.
Further, movement in crude oil prices and currency will also provide direction to the markets, he added.
"We remain structurally positive on the markets. Any dip/correction is expected to act as a strong buying opportunity. We expect Nifty to test 12200-12500 on the higher side while meaningful support is seen at 11400 levels," Sahaj Agrawal, head of research for derivatives at Kotak Securities.
SGX Nifty surges 0.6% while 1-month rupee forwards gain 0.4% to 69.75 a dollar as early counting shows Modi party leading. According to TV reports, BJP has extended lead to 100 seats while Congress to 32 seats.
The Sensex on May 16, 2014, created history by hitting 25,000 for the first time as trends indicated a clear majority for Narendra Modi-led BJP in Lok Sabha 2014 polls. Intra-day, the Sensex surged a massive 1,470 points to hit a then life-time high of 25,375 in early trade fuelled by hopes that BJP government would fast-track reforms and accelerate economic activity. However, it retreated on massive profit-booking to end at record close of 24,121, a gain of 216 points or 0.90%.
In some good news for Indian markets, oil prices today dropped, extending falls from the previous session amid surging US crude inventories and weak demand from refineries. Brent crude futures, the international benchmark for oil prices, were at $70.62 per barrel, down 0.5%, from their last close.