Sensex surges over 3.5%, Nifty crosses 23,300 mark on optimistic exit poll results

High levels of short positions in the market could see sharp drop, analysts said. Adani group companies witnessed a surge in initial hours of trade.

Domestic equity indices opened at record highs on Monday after exit poll outcome of the just-concluded Lok Sabha elections predicted a hat-trick for Prime Minister Narendra Modi. Better-than-expected FY24 gross domestic product (GDP) at 8.2 per cent and S&P’s upward revision of India’s rating outlook to positive from stable also cheered the market, analysts said.

The BSE Sensex surpassed 76,500-mark for the first time on Monday. The 30-share index opened 76,583.29, up 2,621.98 points, or 3.55 per cent. The Nifty opened at record high of 23.337.9, up 807.2 points, or 3.58 per cent.

An average of 10 exit polls have estimated that the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) will better its 2019 tally, winning over 350 seats. As per the projections, the opposition INDIA bloc’s seat counts will vary in the range of 107 to 201.

“Exit Polls indicate a comfortable win for the NDA/BJP in India’s Parliament Elections. While surveys are not the same as final results, we see near-certainty of a third term for the Narendra Modi government with a simple majority for the BJP on its own (the numbers may change in the final result),” said Seshadri Sen Head of Research and Strategist, Emkay Global Financial Services.

The macro-financial stability and focus on capex, investments and manufacturing should sustain the multi-year bull run in Indian equities,” Sen said.

Market experts said that several classes of investors had taken short positions in the market and after the exit polls predicted a win for ruling BJP, the market is witnessing covering of those positions by investors. While FPIs holding long position in the markets had taken some short position to hedge their risk in case of an adverse poll outcome, there were other group of investors who took short position in line with their expectation that BJP may not come to power on their own and may need to cobble up an alliance to form the government, the said.

“Fundamentals, technicals and sentiments turning favourable at the same time are rare in the market. This is what has happened now. The market went into the big event, elections, very light with Nifty correcting around 600 points from the May highs,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

“Profit booking also happened on a large scale. The short position in the market also is high. All these are going to change dramatically. DIIs, HNIs, retail …are all going to turn buyers. Short-covering can add to the momentum,” he said.

According to a Kotak Institutional Equities report, the Indian equity market has seen a modest increase in volatility in the past one month, but India’s VIX is still lower than those seen during previous elections, suggesting less uncertainty regarding the election outcome among market participants.

In the early morning trades, India VIX was hovering at 20.22 compared to the previous close of 24.6. Some of the major indices also opened high on Monday. Nifty Midcap opened 3.52 per cent up at 14,951.85. Nifty Bank crossed 50,000 level for the first time. It opened 1905 up, nearly 4 per cent, at 50,889.85.

Market participants see heavy buying from domestic institutional investors (DIIs) and foreign portfolio investors (FPIs), who net sold Rs 23,364 crore of Indian equities in May.

“When domestic institutional investors are buying, FPI cannot sit on the sidelines. We expect strong FPI inflows going forward,” said a broker.

The NSE companies that gained the most in morning trades include Adani Ports, Adani Enterprises, Power Grid Corporation of India and NTPC Ltd.