After a 5.5% jump on Friday, the Bank Nifty surged 2.5% to close at 14,085.05. Intraday, the index touched an all-time high of 14,152.45, led by gains in State Bank of India (SBI) and private sector banks.
HDFC Bank rose 4.6% to a fresh high amid hefty volume along with Kotak Mahindra Bank (-0.25%) and Axis Bank (0.92%). ICICI Bank, the country's largest private sector bank, rose to its highest level in six years (up 1.77%).
The BSE Auto index rose 2.88% to 14,071.23 with six automakers, including Hero MotoCorp, Ashok Leyland, Maruti Suzuki, Tata Motors, and Mahindra & Mahindra (M&M), touching their 52-week high. The index comprising oil and gas companies rose to highest levels in nearly three years led by Reliance Industries (RIL). The oil & gas companies rose 4% to their three-year high of Rs 1,048 per share. The scrip eventually closed with 3.2% gains on BSE.
Citigroup Global Markets, in its survey of 80 institutional investors in Asia and the US, indicated that the India story was gaining support by a potential political change, micro-level policy reforms and a watchful central bank.
Positive across all asset classes... While there are apprehensions on the pace of reviving investments and consumer sentiments, investors perception of India has changed from hated to loved. This is a result of a potential political change, micro-level policy reforms and a watchful central bank, said Citigroup analysts Rohini Malkani and Anurag Jha, in investor note.
Overseas funds bought about $204 million of shares in the cash segment, showed provisional data from stock exchanges. More importantly, the stoppage in domestic institutional investors' (DIIs) selling supported the gains. DIIs bought $15.5 million (Rs 92.56 crore) of shares on Monday. Domestic funds have sold more than Rs 23,000 crore ($3.8 billion) since the second week of February, data shows.
UBS Securities' head of India research Gautam Chhaochharia sees the markets moving higher on FII buying. He also sees further room for overseas funds to buy Indian equities.
FIIs are adding cyclicals, selling consumers... Even DIIs, who continue to see outflows and remain sellers, their portfolio allocation changes indicate they are also getting more positive on cyclical recovery, said Chhaochharia added.
Macquarie Capital Securities India reiterated its overweight stance on financial and industrials. We believe the drivers of a possible rally after the election results next week could continue to be cyclical sectors, said Rakesh Arora, the managing director and head of research, Macquarie Capital Securities India.