MUMBAI The BSE Sensex surged over 1,000 points Thursday to touch the 40,000-mark for the first time ever following the BJP’s thumping electoral show, but could not sustain the euphoria as investors chose to cash in on the gains.
In similar movement, the broader NSE Nifty crossed the historic 12,000-level after early trends gave the BJP a comfortable majority in the Lok Sabha, but succumbed to profit booking towards the fag-end of the session.
The 30-share Sensex tumbled 298.82 points, or 0.76 per cent, to close at 38,811.39, while the Nifty settled 80.85 points, or 0.69 per cent, lower at 11,657.05.
Interestingly, when the Narendra Modi government came to power on May 16, 2014, the Sensex had rallied 261.14 points, or 0.90 per cent, to 24,121.74; and the Nifty jumped 79.85 points, or 1.12 per cent, to 7,203.
According to experts, the markets had already priced in the election outcome and the focus would now shift to reforms, economic growth, monsoon and developments surrounding the bruising US-China trade conflict.
“The re-election of NDA alliance has put to an end to the uncertainty and raised hopes of momentum gaining in the Indian economy and markets, which logically attained new heights today.
“The results have raised hopes of the issues being faced by the economy being tackled in a firm and prudent way. This is the first time in world history that a government that has introduced GST in a country has been voted back to power,” said Dhiraj Relli, MD and CEO, HDFC Securities.
IndusInd Bank was the biggest gainer in the Sensex pack, rallying 5.23 per cent, followed by Hero MotoCorp, Coal India, Yes Bank, PowerGrid, ICICI Bank, HCL Tech, L&T, Kotak Bank and Bharti Airtel, rising up to 1.56 per cent.
On the other hand, Vedanta, ITC, Tata Motors, HDFC twins, Bajaj Finance, Sun Pharma, Tata Steel, TCS, ONGC and Infosys fell up to 5.53 per cent.
“Markets were initially enthused to see the election results falling in line with the exit polls. However, the run up to the D-day was so sharp that it turned out to be a sell on news phenomenon,” said Devang Mehta, Head – Equity Advisory, Centrum Wealth Management.
Participants would now be keen to know the future course of action for bringing the economy back on track, solution to the liquidity situation, the union budget, onset and progress of monsoon in June and most importantly the earnings trajectory, he added.
Meanwhile, foreign institutional investors poured in a net Rs 1,352.20 crore into the equity markets Thursday, provisional data showed.
Sectorally, the BSE telecom, capital goods, industrials, realty and power indices ended up to 0.97 per cent higher.
However, FMCG, metal, consumer durables, finance, teck, healthcare and auto declined up to 1.82 per cent.
The broader BSE midcap and smallcap indices followed the benchmarks, shedding up to 0.15 per cent.
According to traders, weak cues from other global markets and a depreciating rupee also weighed on investor sentiment.
The rupee depreciated 37 paise to 70.04 against the US dollar in afternoon trade.
Globally, equities wobbled owing to the continuing US-China trade tensions and lacklustre PMI data in Europe.
Bourses in Asia ended in the red, while European markets were also trading on a negative note in early deals.
Brent crude, the global oil benchmark, was trading 1.79 per cent lower at USD 69.72 per barrel.
Stock market wealth grew by Rs 75 lakh cr since Modi-led NDA won polls in 2014
India’s stock market wealth grew by Rs 75.25 lakh crore in five years since Narendra Modi-led NDA emerged victorious in the Lok Sabha polls in 2014, with benchmark Sensex gaining 61 per cent during this time.
An analysis of the stock market movements from May 16, 2014 till date showed that the 30-share BSE Sensex jumped 14,689.65 points or 60.89 per cent. The index hit an all-time high of 40,124.96 points in morning trade on Thursday, amid trends pointing towards a thumping majority for Modi-led NDA in the general elections.
The overall market capitalisation (m-cap) of BSE-listed companies has grown from little over Rs 75 lakh crore to Rs 150.25 lakh crore during May 16, 2014-May 23, 2019 period. This represents an increase of Rs 75.25 lakh crore.
At close of trade Thursday, the market valuation of BSE-listed firms was at Rs 1,50,25,175.49 crore.
The BSE benchmark index jumped 1,014.75 points to 40,124.96 during the day after BJP’s strong showing in the Lok Sabha polls. However, later it gave up all the gains and closed at 38,811.39, a fall of 298.82 points amid profit-booking towards the fag end of the day’s trade.
The results of 2014 Lok Sabha polls were announced on May 16 and BJP had won 282 seats. Subsequently, National Democratic Alliance (NDA), headed by Prime Minister Narendra Modi, formed the government.
“In the past 5 years, the stock market has made new highs and touched new milestones. Politics is at the crux of the current rally and stocks have risen only due to the euphoria of a Modi government coming back to power for yet another term.
“History has shown time and again that during elections, emotions always surpass rationality and it is this very sentiment that drives the markets. However, this sentimental rally is short-lived and eventually when the frenzy fades away, markets might witness a decent correction,” Umesh Mehta, Head of Research at SAMCO Securities, said.
Jagannadham Thunuguntla, Senior Vice President and Head of Research (Wealth) at Centrum Broking, said that in 2014, there was historic political mandate with single party winning clear majority leading to huge rally in equity markets in anticipation of major reforms.
According to him, there was broad-based rally with participation across sectors creating enormous wealth for investors but starting 2018, the markets rally got concentrated into select large-cap companies with under performance in broader markets.
“With the clear mandate coming in 2019 elections, there is a possibility that this divergence between large-caps and mid-caps will disappear; and participation may again become broad-based,” he said.
Nilesh Shah, MD and CEO of Kotak Mutual Fund, said removal of political uncertainty is always welcome from a market point of view.
“Current mandate shows the maturity of voters in choosing a stable government. Now with that uncertainty behind, markets will focus on steps taken by the government to encourage investment and give push to consumption, which is hitting a soft patch,” he added.
RIL is the country’s most valued firm with a market valuation of Rs 8,46,751.88 crore, followed by TCS (Rs 7,72,728.58 crore), HDFC Bank (Rs 6,36,120.68 crore), Hindustan Unilever Ltd (Rs 3,79,028.92 crore) and HDFC (Rs 3,66,149.73 crore).
“Well, since 2014 the markets have done very well up 60 per cent in five years. This a is a very good performance by any standards, global or local,” Sindhu Sameer, Head of Sales Institutional Equities at Emkay Global Financial Services Ltd, said.