Friday blockbuster: Hopes of BJP government send BSE Sensex soaring

Written by fe Bureau | Mumbai | Updated: May 10 2014, 07:47am hrs
BSE SensexMarket experts FE spoke to said many global institutional investors are optimistic of Modi?s victory. Reuters
Benchmark equity indices surged to their new highs on Friday, with the Sensex touching the 23,000-point mark for the first time ever, as foreign institutional buying gathered pace on renewed confidence that Bharatiya Janata Party-led NDAs prime ministerial candidate Narendra Modi will come to power in the on-going general elections.

Market experts FE spoke to said many global institutional investors are optimistic of Modis victory. Some big institutions that have covered the elections and done their own surveys after the May 7 phase of polling believe the NDA will get 272 seats, they said.

Polls in 502 out of 543 seats have been conducted, Election Commission data show.

After four weeks of range-bound trading, the Sensex surged 2.91% or 650.19 points to settle at 22,994.23 the highest closing ever. The Nifty rose 3% or 198.95 points to settle at 6,858.80, led by strong buying in financial, capital goods, real estate, metal and energy companies.

Macquarie Capital Securities India has recommended clients to go long ahead of the election results, stating that markets have room for an additional 5-10% jump. The Australian global investment banking and diversified financial services group said the markets were trading in a range and the Street will use the exit poll trigger to move higher.

Markets are up 9% in the past six months, scaling new highs at every given opportunity. However, the consolidation over the past few weeks is reflective of the wait and see mode that markets have entered into ahead of election results... We recommend going long ahead of election results, said Rakesh Arora, MD and head of research, Macquarie.

Overseas funds bought $212 million of Indian shares in the cash segment on Friday, taking the current buying streak in Indian equities to 14 sessions, showed provisional data from stock exchanges.

Foreign institutional investors, who have been betting heavily on Modi to lead the next government at the Centre, have pumped in $1.03 billion in these 14 sessions. After Fridays purchase, FII investment in Indian equities stands at $5.77 billion the second highest inflow by FIIs after Taiwan ($6.05 billion), Bloomberg data show.

According to Gautam Chhaochharia, head of India research, UBS Securities, markets are advancing higher on FII buying and there is more room for overseas funds to buy Indian equities.

Domestics (domestic institutional investors) continue to remain sellers... This reflects FIIs comfort on improving macro fundamentals for India relative to rest of the emerging markets as well as heightened hopes around election outcomes. Our discussions with FIIs indicate that they are largely overweight India, said Chhaochharia.

The momentum was also seen in broader markets, albeit with some caution. The BSE Mid-cap index rose 1.5% while the Small-cap index ended up 0.7%. Market breadth was strong. Twenty-seven out of 30 Sensex companies ended with gains. Overall, 1,588 stocks advanced compared with 1,175 stocks ending in the red.

Twelve out of 14 sectoral indices ended higher, according to BSE data. Banking stocks were the biggest beneficiaries of FII buying, lifting the gauge of banking shares to a record high. The CNX Bank Nifty rose 5.5% on Friday, with all 12 banking stocks that are part of Bank Nifty ending higher.

Private sector lender ICICI Bank advanced 7.2% to its highest level in more than six-and-a-half years. HDFC Bank (5.6%), Axis Bank (6.2%) and Kotak Mahindra Bank (5.3%) all rose to their life highs. Yes Bank was the top gainer with a 9.34% gain.

From the non-banking space, Tata Power was the top gainer on the bourses with a 5.6% gain, followed by Hindalco (5.35%), BHEL (5.21%), Coal India (5%), ONGC and Maruti (both 4.13%).

Many domestic and foreign brokerages continue to remain overweight on cyclicals. Macquarie has further increased its overweight position in the shares of financial and industrial companies.

FIIs are adding cyclicals, selling consumers, said UBS Chhaochharia, adding that FIIs are overweight banks, autos and cement companies.