Banking stocks post smart gains; exit poll reports to give further direction

Stock markets touched a new high on Friday, riding on Dalal Street’s expectations that the Bharatiya Janata Party-led alliance will form the next Government, with Narendra Modi as the Prime Minister.

The BSE Sensex, which briefly breached the 23,000-mark to touch 23,048.49 during the closing hours, ended at 22,994, 3 per cent higher than the previous closing.

The NSE Nifty ended at 6,859, up 199 points, amidst heavy buying in the banking, realty and power sectors.

Both the benchmark indices posted their biggest single-day gains since September 19, 2013.

In the currency market, the rupee hit a high of 59.92 against the US dollar before closing at 60.04, over Thursday’s close of 60.07.

All eyes on exit polls

According to Motilal Oswal, Chairman and Managing Director of Motilal Oswal Financial Services, there is huge foreign investment interest in the market as well as an up-tick in domestic investment activity in anticipation that the BJP-led National Democratic Alliance will get a majority in the Lok Sabha.

While the actual election results will be announced on May 16, exit poll reports conducted by various media houses are expected to be released on May 12, and will be eagerly watched by market participants for an indication on which way the market will go.

“The market is voting for NDA and the party could continue unless there are surprises. If NDA gets 275-280 seats there would be further scope of upside by 3-5 per cent. However, if their seat tally comes to 240 or 250 then the market may see a fall of 3-5 per cent,” said Oswal.

“After May 16, the market will be looking at the decision-making process on reforms, and the appointment of the new Finance Minister, for direction,” he added.

On Friday, a stellar performance by the Bank Nifty was instrumental in supporting the broader index after it closed at 13,750, up 5.47 per cent from its previous close on Friday. Private sector banks ICICI Bank and Yes Bank were the biggest gainers, zooming 7.21 per cent and 9.34 per cent, respectively, to close at ₹ 1,382 and ₹485.

Gaurang Shah, Vice-President, Geojit BNP Paribas Financial Services, said: “Private banking stocks fare better on the back of better results, short covering and expectation of corporate India firing on capital expenditure.”

Foreign institutional investors bought ₹1,268.78 crore worth of shares on Friday, while retail investors sold shares worth ₹354 crore.

According to Jagannadham Thunuguntla, Strategist & Head of Research at SMC Global Securities, retail investors who have taken advantage of the rally over the last three months should now book profits. New investors should, however, enter the market only after results are announced on May 16, he said.

Friday’s rally took place amidst high volatility, with the India VIX index closing at 38, up about 10 per cent from its previous close.

“The market is preparing for election results and one can expect high volatility to continue for a few more days,” said Thunuguntla.

(This article was published on May 9, 2014)
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