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Rediff.com  » Business » Saffron surge set to fire up markets

Saffron surge set to fire up markets

May 13, 2014 08:46 IST

Sensex gains 2.4%, Nifty crosses 7,000; investors feel exit polls have vindicated their stand
The exit have validated Dalal Street's stand that the National Democratic Alliance will get a clear majority and stocks could continue with their uptrend, leading market players say.

The markets on Monday posted sharp gains by rallying over 5 per cent over two trading days, on hopes that Narendra Modi will be the country's next prime minister.

The Sensex rose 556 points, or 2.4 per cent, to close at 23,551 on Monday, while the boarder NSE Nifty crossed the 7,000 mark for the first time to end at 7,014, up 155 points or 2.3 per cent.

“The market has voted for Narendra Modi. It has moved ahead on expectation of a stable government,” said Motilal Oswal, chairman of domestic broking firm Motilal Oswal Financial Services.

“Now that the exit polls seem to suggest a positive outcome, all those who were on the sidelines are coming into the market,” said Rashesh Shah, chairman and founder, Edelweiss Financial Services.

The Nifty futures index traded on the Singapore Stock Exchange (SGX) reacted positively to the exit polls, while Indian shares listed in the US — Amercian depositary receipts (ADRs) — also saw a spike in prices. Forex experts suggested that the domestic currency could strengthen against the greenback.

More than Rs 3 lakh crore of wealth was created as the benchmark Sensex rallied 1,200 points, led by several blue-chips, including Reliance Industries, ONGC, Coal India and State Bank of India, in the last two sessions.

Foreign institutional investors (FIIs) have been pumping in big bucks into stocks on hopes that the exit polls would show a BJP victory.

On Monday, overseas investors put in Rs 1,200 crore (Rs 12 billion) into equities, taking their two-day investment tally to nearly Rs 2,500 crore ($420 million), as per provisional figures provided by the stock exchanges.

“The market has been discounting election results. This is leading to incremental buying from foreign investors. Investors are factoring in about 250 seats for the NDA,” said Saurabh Mukherjea, CEO, institutional equities, Ambit Capital.

Even though exit polls suggest the election outcome will be in line with market expectations, experts are advising investors to exercise caution following the sharp upmove. “The markets could see a sharp sell-off if the final election outcome is far from what has been predicted,” said Shah.

Some believe it will not be prudent to react to the exit polls, which historically have been inaccurate.

“We are seeing layer upon layer of uncertainty. Most seasoned investors will not obsesses too much about the exit poll outcome,” said Mukherjea.

Samie Modak & Sneha Padiyath in Mumbai
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