As the initial results from exit polls projecting a victory for the ruling party in the recent general elections emerged, domestic equity indices soared to new record highs on the optimism.
The blue chip BSE Sensex index surged over 3.5% in early trade to breach the 76,500 level for the first time. The 30-share index rose over 2,600 points, climbing to an all-time peak of 76,583 points. Similarly, the broader Nifty50 benchmark on the National Stock Exchange jumped over 800 points or 3.5% to a new record high of 23,338 points.
The robust projections of the ruling party winning a third straight term energized investor sentiment. Average estimates from exit polls showed the incumbent alliance winning over 350 seats, suggesting it will retain power comfortably. In comparison, the main opposition alliance’s projected tally ranged from 107 to 201 seats.
The prospect of policy continuity and stability under the leadership of the incumbent Prime Minister buoyed market participants. Expectations are high that the pro-growth reforms and increased capital expenditure focus will continue. Strong macroeconomic data including last fiscal year’s GDP growth of 8.2% and an improved economic outlook also boosted buying interest.
Many traders had accumulated short positions expecting some uncertainty around the election outcome. However, the unambiguous exit poll predictions are now fuelling covering of these short bets. Additionally, domestic investors seem to be purchasing shares at current levels, anticipating foreign flows going ahead.
Overall, the encouraging exit poll sketched a feel-good setting for the market. Most analysts feel investor participation is set to rise further on expectations of robust inflows from foreign and domestic funds in the coming months. With positive sentiment prevailing, further gains could be in store for D-Street.
