The stock market rallied to a record and the rupee touched a four-month high against the dollar a day after the BJP’s good showing in the just concluded Assembly elections giving the party an edge over the ruling Congress in the general elections in 2014.
The BJP’s resurgence has raised hopes that the party will provide the much-needed political stability and thereby kickstart reforms.
The Nifty closed at 6,364, up 104 points (1.66 per cent), while the Sensex ended at 21,326, up 330 points (1.57 per cent).
“The BJP’s dominance over the four States is an early indication of what can happen in the deciding round of elections going forward and the market will definitely try to discount that before the elections itself.
“Considering all aspects, an investor should stay invested in the markets with a bullish viewpoint,” said Vivek Gupta, Director, Research, CapitalVia Global Research.
The market surge was accompanied by a strengthening rupee that hit a four-month high at 60.84 to a dollar on Monday on heavy capital inflows and dollar selling by exporters. Extending its rising streak for the fourth straight day on Monday, the Indian unit appreciated 51 paise to Rs 60.90/$ in opening trade. It finally closed at Rs 61.13/14, a gain of 28 paise over Friday’s close.
“The rupee surged primarily on foreign investors’ bullish prospects of the BJP coming to power at the Centre after Sunday’s State election victories. FIIs are continuously participating in the market. Also, exporters sold dollars citing further appreciation in the rupee,” said N. S. Venkatesh, Head of Treasury, IDBI Bank.
FIIs remained net buyers of equity worth Rs 2,473 crore, while domestic institutional investors shed equity worth Rs 1,206 crore in the net. Retail investors were also net sellers to the extent of Rs 213 crore on the BSE.
Volatility down Positive cues from China helped market open on a buoyant note. Barring consumer durables, all other broader and sectoral indices closed in the green. The Volatility Index was down 13.73 per cent.
Moving away from politics, Sanjeev Prasad, Senior Executive Director and Co-Head, Kotak Institutional Equities, stuck a cautious note, saying: “India has no options but to improve its fiscal position and investment climate. However, a pick-up in investment may be some time away, given the severe challenges in capital, resources, approvals, workforce and land for investment.”
Similarly, flagging the economy, P. V. K. Mohan, Head – Equities, Principal Mutual Funds, said: “Concerns would be sticky inflation and the possibility of further rate hike by the RBI, notwithstanding the expected stimulus withdrawal by US Fed in 2014.”