Call it the Modi effect or a pre-election rally — the BSE Sensex hit an all-time high of 21,525 and closed at a historic high of 21,513.87 on Thursday, a day after the Election Commission announced the schedule for the 2014 Parliamentary elections.

The 50-stock NSE Nifty closed at 6,401.15, up 1.15 per cent over the previous day’s close.

Though the Nifty recorded its highest close, it failed to breach the intra-day peak of 6,415.25, registered on December 9, 2013.

Although a few of them have been called into question, opinion polls have been suggesting that the National Democratic Alliance is far ahead of its rivals and within striking distance of forming the next government.

According to a Business Line study, on three out of four occasions during past election years, the Sensex ended in the green ahead of the polls. On two occasions — 1991 and 1996 — the gains were significant on the perception of the formation of a strong government post-elections.

In 1991, it continued to rise after the PV Narasimha Rao-led Government took over — the Sensex was up 8.86 per cent a month later.

In 1996, however, it crashed 8.3 per cent, a month after the highly unstable United Front Government took charge.

According to Deutsche Securities, the BSE Sensex is likely to scale 24,000 by the year-end on receding chances of a fractured verdict in the upcoming Lok Sabha elections, lower inflation and improving global risk appetite.

The easing of tensions in Ukraine and the narrowing of the current account deficit also added impetus to the rally.

CAD cheer On Wednesday, data from the Reserve Bank of India showed that the current account deficit had narrowed to 0.9 per cent of GDP in the October-December period from 1.2 per cent in the July-September quarter. CAD stood at 2.3 per cent of GDP during April-December.

Shares have been rising on expectations that the Narendra Modi-led NDA alliance will form the next Government. Most observers see the NDA alliance as being more market-friendly, and giving a much-needed push to the stalled reforms process.

Interestingly, this time around a number of mid- and small-cap stocks have been participating in the rally.

Beaten-down sectors, such as banking, capital goods, real estate and power have also joined the party.

None of the sectoral indices except CNX Pharma on the NSE closed in the red on Thursday.

Shrikant Chouhan, Head-Technical Research, Kotak Securities, said the market had failed a number of times from the 6,360 level but on Thursday it closed above that mark with broad-based participation.

According to Motilal Oswal of Motilal Oswal Financial Services, the market has hit a new high on the basis of strong FII flows as well as increasing retail participation. “We feel a strong political mandate will result in increasing optimism and new levels.”

FIIs picked up shares worth ₹1,272.93 crore on Wednesday, according to stock exchange data. Even in the derivative segment, they are building up huge long positions on index futures.

Amid the exuberance, there are some words of caution too. “Since we are at the higher end of the trading range, we advice profit booking at current levels and wait out for dips to get back into the markets. Also, it would be prudent to stay with defensive sectors for now till we get clarity on the election front,” said Gaurang Shah, Assistant Vice-President, Geojit BNP Paribas Financial Services Ltd.

Rupee high The rupee gained 64 paise to close at a near-three-month high of 61.11 against the dollar.

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