On Monday, June 3, the Indian stock market benchmarks, Nifty 50 and Sensex, reached unprecedented heights in early trading sessions. This surge followed exit poll predictions on Saturday, June 1, indicating that the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) could secure over 340 out of 543 seats in the 2024 Lok Sabha elections. The stock market, initially jittery about the elections, responded positively to these exit poll results, which suggested a strong return for the BJP-led NDA with a significant majority.
Sensex opened 2,622 points higher at 76,583.29 from its previous close of 73,961.31, ultimately climbing 2,778 points, or 3.8 percent, to a new record of 76,738.89. Similarly, the Nifty 50 began 807 points higher at 23,337.90 from its last close of 22,530.70 and increased 808 points, or 3.6 percent, to a fresh high of 23,338.70 in early trading.
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Investors engaged in extensive buying across all sectors, driving midcap and smallcap indices to new record highs, each rising nearly 4 percent. The BSE Midcap index soared 4 percent to a new peak of 44,560.97, while the BSE Smallcap index jumped 3.6 percent to an all-time high of 48,973.96. Nearly 200 stocks, including major players like SBI, ICICI Bank, Axis Bank, Bharti Airtel, Larsen and Toubro, Mahindra and Mahindra, NTPC, and Power Grid, reached new 52-week highs during Monday's intraday trading on the BSE.
In May, heightened election-related uncertainty led to a break in the Nifty50 and Sensex's three-month winning streak, with both indices closing in negative territory. The volatility index, India VIX, spiked by 91 percent during the month.
While exit poll results were the primary catalyst, experts also identified four other factors that contributed to the buoyant market sentiment. Here are three key triggers that propelled the market to record high levels:
Exit Poll Results:
Majority of exit polls on June 1 forecasted a historic third term for the Prime Minister Narendra Modi-led NDA government. The BJP-led NDA is projected to win over 350 seats according to at least ten exit polls. Notably, three significant exit polls – India Today-My Axis India, India TV-CNX, and News24-Todays Chanakya – have predicted over 400 seats for the NDA, with the Opposition INDIA bloc projected to secure fewer than 200 seats. With the conclusion of the Lok Sabha elections, analysts predict a continued positive trend in the market, barring any unforeseen negative events.
Macro Boost:
Data released by the National Statistical Office (NSO) on Friday, May 31, revealed that India's GDP grew by 7.8 percent in the January-March quarter of fiscal 2023-24 (Q4FY24). For the full fiscal year FY24, the economy expanded by 8.2 percent, surpassing estimates. Furthermore, the government's fiscal deficit for 2023-24 was reported at 5.63 percent of GDP, slightly better than the 5.8 percent projected in the Union Budget, according to the Controller General of Accounts (CGA) on Friday, May 31.
Broad-Based Buying:
The market experienced widespread buying, particularly in the banking, financial, metal, realty, and oil and gas sectors. The Nifty Bank index surged over 4 percent to a new record high of 50,990, while the Nifty PSU Bank index soared nearly 7 percent in morning trade. Realty, Metal, and Financial Services indices also jumped up to 4 percent.
As the Indian stock market continues to ride the wave of optimism fueled by exit poll predictions and robust economic data, investors are eagerly anticipating the market's next moves. Will the positive momentum sustain, leading to further record highs, or will unforeseen developments introduce new volatility? In these dynamic times, making informed investment decisions is crucial. Motilal Oswal, with its comprehensive research and expert team of analysts, stands ready to guide you through these market fluctuations. Stay ahead of the curve and make strategic investment choices with insights from Motilal Oswal, ensuring you are well-prepared to navigate the ever-evolving financial landscape.
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