Benchmark stock indices Sensex and Nifty rose for the third day in a row tracking positive Asian stock market movements and speculation of a BJP victory in the Gujarat Assembly elections.

Sustained buying by domestic institutional investors (DIIs) saw the S&P BSE Sensex rise 0.62 per cent or 205 points to close at 33,455 points. The broader index CNX Nifty of the National Stock Exchange gained 0.55 per cent or 56 points to close at 10,322.

Experts said equity derivatives had witnessed a huge build-up of positions on the long side in anticipation of a BJP victory in the Gujarat polls, the results of which will be declared on December 18. In the equity options segment there were 0.36 ‘Put’ options for every single ‘Call’ option, indicating traders were bullish on markets and anticipation a sharp up-move in indices in the next few days.

In just two trading sessions on Friday and Monday, DIIs made net purchases of stocks worth more than ₹1,300 crore. Foreign institutional investors continued with their selling spree on both these days.

“The Gujarat elections are the last big market trigger for this year and if the BJP manages to win more seats than it did in the 2012 elections, markets willl see a sharp surge,” said an analyst at Mumbai-based brokerage.

Other market triggers during the week include the US Federal Reserve’s meeting to hike lending rates for the second time in over a decade. Experts say markets were already factoring in a quarter-percentage-point rise in the Fed’s lending rates. Other central banks, including the Bank of England and European Central Bank, will be holding their meetings for the last time this year and are expected to maintain a status quo on rates.

India’s benchmark bond yield rose to a 15-month high of 7.17 per cent on Monday, ahead of the Fed meeting. The rise in bond yields is in accordance with a spike in bond yields of all major European and Asian countries.

Optimistic buying by participants ahead of industrial production and inflation numbers to be released later this week also supported the rally.

The gainers

Stocks that gained on Monday included Bharti Airtel, Axis Bank, SBI, Wipro, ITC Ltd, Tata Steel, Maruti Suzuki, HDFC Ltd, Lupin, Tata Motors, Coal India and Sun Pharma.

Japan’s Nikkei gained 0.04 per cent and Shanghai Composite rose 0.40 per cent in early trading while Hong Kong’s Hang Seng was up 0.51 per cent.

The US Dow Jones Industrial Average ended 0.49 per cent higher on Friday. Futures on US key stock indices suggested a higher opening on Monday even though they briefly fell on the news of a bomb blast in New York ahead of market opening.

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