Today’s stock market saw record highs for the Sensex and Nifty 50. GDP statistics from exit polls in 2024: four reasons why the market is booming

Current state of the stock market: The Nifty 50 and the Sensex, two benchmarks for the Indian stock market, surged to all-time highs in early trade on Monday, June 3, following predictions from most exit polls on Saturday, June 1, that the NDA, lead by the Bharatiya Janata Party (BJP), may win more than 350 of the 543 Lok Sabha seats in 2024.

Election-related anxiety subsided for the Indian stock market, as exit polls indicated that the BJP-led NDA would win a sizable majority and return to power.

Sensex climbed 2778, or 3.8 per cent, to reach its new record high of 76,738.89, opening 2,622 points higher at 76,583.29 versus its previous closing of 73,961.31.

Conversely, the Nifty 50 began trading 807 points higher at 23,337.90, compared to its closing value of 22,530.70. 

In early transactions, it gained 808 points, or 3.6%, to reach a new record high of 23,338.70.

A wild purchasing frenzy by investors spread across all market categories, and the small- and mid-cap indexes also shot up to new all-time highs, rising by about 4% apiece.

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The BSE Smallcap index leaped 3.6 percent to a new record high of 48,973.96 and the BSE Midcap index soared 4% to a new all-time high of 44,560.97.

In intraday trading on the BSE on Monday, almost 200 stocks—including SBI, ICICI Bank, Axis Bank, Bharti Airtel, Larsen & Toubro, Mahindra and Mahindra, NTPC, and Power Grid—reached new 52-week highs.

The Nifty 50 and Sensex ended their three-month winning streak in May, ending down as a result of increased volatility brought on by election-related concerns. 

In May, the India VIX volatility index increased by 91%.

Experts have found three other variables that might have contributed to the positive attitude in the stock market, even if the exit poll findings were the primary driver.

“Nifty opened higher, mostly due to exit poll results showing the BJP-led NDA government winning handily for the third consecutive election. 

Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities, stated that in addition to this, a few other factors that drove the index higher were better-than-expected GDP figures, the significant decline in US markets on Friday, the start of the monsoon, and a decrease in the budget deficit.

Sheth emphasized that the Nifty 50 is now situated above the rising parallel channel’s upper boundary. 

He thinks that when the counting begins on June 4th, the index may reach 23,500.

According to Sheth, traders should take advantage of this chance to book gains on current long holdings and hold off on opening new long positions until the Nifty dives between 23,000 and 22,800 points.

“The Nifty’s medium-term target is approximately 24,500,” stated Sheth.

Let’s examine four significant catalysts that drove the market to all-time highs:

Results of the exit poll

As previously reported by Mint, the majority of exit poll findings from June 1 indicated that the National Democratic Alliance (NDA), led by Prime Minister Narendra Modi, will win an unprecedented third term in office. 

At least ten exit polls indicate that the Bharatiya Janata Party (BJP)-led NDA is expected to win more over 350 seats.

More than 400 seats have been forecast for the NDA by three prominent exit polls, India Today-My Axis India, India TV-CNX, and News24-Todays Chanakya. 

Less than 200 seats are expected to be won by the opposition INDIA alliance, according to pollsters.

Analysts predict that, barring any unforeseen bad occurrences, the market will remain in positive territory in the following days now that the Lok Sabha elections are completed.

“Over the following three to four days, we expect Indian stocks to increase, with the Nifty hitting a new all-time high this week.

Around 23,200–23,300 is where we anticipate the Nifty to end up during this time. Furthermore, we anticipate that the Indian rupee will appreciate to 82.75 and the country’s 10-year yield will reach 6.9 percent, according to Amit Goel, Pace 360’s co-founder and chief global strategist.

Large-scale increase

India’s gross domestic product (GDP) for the January–March quarter of fiscal 2023–24 (Q4FY24) was 7.8%, according to figures issued by the National Statistical Office (NSO) on Friday, May 31. 

The country’s economy increased by 8.2% for the whole FY24, above forecasts.

Moreover, figures issued by the Controller General of Accounts (CGA) on Friday, May 31 showed that the government’s budget deficit for 2023–24 was 5.63 percent of GDP, slightly less than the 5.8 percent projected in the Union Budget.

• The 8.2 percent gain in the GDP on Friday was stronger than anticipated. 
• The market will receive essential support from this. 
• The rating outlook for India has been upgraded by S&P, which is also encouraging,” stated V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
• After 14 years, S&P Global upgraded its outlook for India last Wednesday to positive and stable, noting the country’s solid macroeconomic foundation and significant government capital expenditures. 

Nonetheless, the rating agency maintained its lowest sovereign credit rating of ‘BBB-/A-3’. It stated that during the following two years, ratings might rise with careful monetary and fiscal policies.

Whole-hearted purchasing

The banking, finance, real estate, metal, and oil and gas industries led the market’s widespread purchasing. 

At 50,990, the Nifty Bank index jumped by more than 4% to set a new record.

In morning trade, the Nifty PSU Bank index surged by about 7%, while the indexes for real estate, metals, and financial services increased by 4%.

uplifting global cues

Good international cues helped to reinforce confidence in the home market.

Though expectations of rate reduction in Europe have been building, inflation is still sticky.

 

Rate cuts may also be on the US Federal Reserve’s radar in the second half of the year.

Furthermore, certain significant Asian economies have seen a recent improvement in macrodataprints. 

Reuters reports that South Korea’s manufacturing activity surged at its quickest rate in two years in May, while Japan’s factory activity increased for the first time in a year in May.

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