Markets have been on a roller coaster ride since May, with volatility taking an upper hand, ahead of the election results. India's volatility index, VIX surged by nearly 80 per cent last month alone before easing back on Monday. As the last phase of Lok Sabha elections ended, giving way to exit polls last week, coupled with FY24 GDP data hitting 8.2 per cent, markets witnessed record gains on Monday.
Bullish sentiments drove the benchmark indices to new all-time highs. BSE Sensex surged by more than 2000 points, reaching a record high of 76,738. Similarly, NSE Nifty also crossed the 23,300 level mark, zooming in by nearly 600 points.
Most of the exit poll projections gave out an easy win to BJP-led government. Almost 10 exit polls suggest that the BJP-led NDA will win at least 350 seats. But three exit polls – India Today-My Axis India, India TV-CNX, and News24-Todays Chanakya exit polls have predicted over 400 seats for the NDA.
With the election results coming up tomorrow, June 4, investors are on the edge of their seats. While most of the D-street analysts are bulls to take charge, some are doubtful and worried about markets getting heavily inflated.
Chakrivardhan Kuppala, Cofounder and Executive Director, Prime Wealth Finserv believes that the market sentiment is expected to receive a significant boost from post BJP-led NDA's victory. "This wave of optimism could push the Nifty 50 index up by 5-7 per cent in 4-6 months," he said.
Drawing parallels with the last Lok Sabha elections, Kuppala added, "when political stability is assured, we've seen a notable uptick in investment activity. After the 2014 elections, equity mutual fund inflows increased by about 15 per cent within six months, as investors felt more confident about the economic outlook. The mutual fund industry, which has enjoyed an average growth rate of 12 per cent over the past five years, is likely to thrive even more with this renewed investor confidence."
Almost every sector was trading in the green territory with the PSU bank index rallying the most, up by nearly 7 per cent.
Adani Power came out on top as the shares of the company rose by more than 15 per cent.
How Experts See Markets Moving
While the broader optimism prevails, analysts caution that profit-taking might occur after the rally. PSU, defence and railways remain the top pick.
"The market is expected to react positively to the upcoming budget, but there might be some profit-taking after the recent rally. Sectors like defense, railways, and manufacturing are likely to keep climbing, and financials could join the party as well. Divestment stocks might also perform well," said Arpit Jain, Joint MD, Arihant Capital.
"Investors might want to consider booking some profits on the current high and wait for a dip to re-enter the market. The long-term outlook remains positive," he added.
Amit Goel, Co-Founder & Chief Global Strategist, Pace 360 believes that investors can buy the gap up on Monday as broader optimism unfolds, with particular emphasis on PSEs, and defense and infrastructure companies.
As all sectors trade in green, D-street analysts are expecting the rally to extend to other sectors like diversified businesses and MNCs. However, the sharp surge in equities has also raised concerns that a consolidation might occur in the upcoming months.
"While the long-term outlook remains positive. In the short term, however, the market might consolidate as everyone waits for the details of the July budget," said Jain.
