Sensex Rallies to New Heights: A Stock Market Frenzy Triggered by Election Exit Polls

03 June 2024

Today, the Indian stock market opened with an exhilarating rush, as the BSE Sensex reached an all-time high, and the Nifty 50 crossed the 23,000 mark. Meanwhile, the India VIX plummeted to 19%. This electrifying surge in equity benchmark indices was driven by the upbeat Lok Sabha election exit poll results, hinting at a landslide victory for the BJP-led National Democratic Alliance (NDA).

The Exit Poll Buzz

Exit polls have become the talk of the town, predicting a robust win for the NDA with projections of up to 350 out of 543 seats. If these predictions hold, Prime Minister Narendra Modi is set for a historic third term. Here's a peek at some prominent agencies' forecasts:

• ABP News-CVoter: 368 +/- 15

• Dainik Bhaskar: 316 +/- 34

• India Today-Axis My India: 381 +/- 20

• India TV-CNX: 386 +/- 15

• NDTV-Jan Ki Baat: 377 +/- 15

• News18-CNBC: 362 +/- 8

• Republic TV-Matrize: 360 +/- 8

• Republic TV-PMarq: 359

• Times Now-ETG: 358

A few agencies even suggest that the NDA could surpass the 400-seat milestone, aligning with the BJP's campaign slogan, "Abki Baar, 400 Paar."

Market Euphoria and Caution

The current market rally reflects the widespread euphoria, but it's crucial to remain cautious until the actual election results are announced. As Motilal Oswal Financial Services notes, if the final results mirror the exit polls, it would be the first time since the 1960s that an incumbent Prime Minister returns to power for a third consecutive term with a solid majority. This historical parallel draws a line back to Jawaharlal Nehru's consecutive wins in 1952, 1957, and 1962.

Dhiraj Relli, MD & CEO of HDFC Securities, emphasized that the potential return of the BJP is promising for continuing and accelerating the reform process. "This outcome was mainly on the expected lines. Hence, markets may, after the initial excitement, wait out for the new path set out by the latest government. If the NDA does not get 400+ seats, some fundamental reforms requiring constitutional amendments may be challenging to implement, but there is still a lot that can be done with this kind of majority," Relli stated.

Expert Insights and Investment Recommendations

Many experts and industry leaders believe that the positive market reaction to the exit poll results will translate into further gains if the actual election outcome confirms these predictions. This verdict, coupled with political stability and continuity in policy-making, is expected to be the icing on the cake, keeping India in the spotlight. Investors tend to favor continuity in economic policies, and a clear mandate for the BJP would likely reduce uncertainty and spur a buying spree. Conversely, a lower-than-expected seat count for the BJP may result in increased market volatility and a short-term correction.

Here’s what some recommend for investments considering a potential BJP win:

MOFSL's Top Picks:

• ICICI Bank, SBI, L&T, Coal India, M&M, Adani Ports, ABB, HPCL, and Hindalco

• Midcaps: Indian Hotels, Godrej Properties, Global Health, KEI Industries, PNB Housing, Cello World, Kirloskar Oil

Yes Securities' Favorites: NTPC, Texmaco Rail & Engineering (Texrail), SBI, GMR Airports Infrastructure, and Bharti Airtel

Phillip Capital's Wealth Creators: SBI, BoB, Canara Bank, PFC, REC, Shriram Finance, Muthoot Finance, UltraTech, Siemens, Hero MotoCorp, TVS Motor, Divi's Labs, Syngene, APL Apollo, Jindal SAW, IGL, Aarti Industries, Vinati Organics, Praj, Gokaldas Export, and SP Apparel

Favored Sectors: Automobiles, BFSI, Defense, Infrastructure, Manufacturing, Railways, Telecom, and the Large-cap stocks

Sandeep Pandey of Basav Capital advises focusing on quality, debt-free stocks or those with minimal debt exposure, warning against speculative "monkey and donkey stocks."

Looking Ahead

As Venugopal Garre of Bernstein points out, the optimism surrounding the NDA's prospects is strong, with 390-400 seats becoming a new baseline expectation.

Today’s record-breaking performance in the Indian stock market is a testament to the potent mix of election optimism and investor confidence. As we await the official election results, market participants should stay vigilant, balancing euphoria with prudence. Once the election phase concludes, market attention will shift to the upcoming Union Budget, expected in July, suggesting that market dynamics will continue to evolve.

The future looks bright for the Indian economy and stock market, provided political stability and continuity in policy-making are maintained. Keep an eye on the evolving scenarios, and be prepared for both opportunities and challenges ahead.

Disclaimer: The opinions or recommendations above are those of experts and brokerage firms, not IWD. We advise you to consult certified experts before making any investment decisions.