The news of the report sent the BSE Sensex to a new lifetime high of 22,040.72, but gave up most gains later and closed up by 22.81 points at 21,832.61. It breached the previous historic high of 22,023.98 logged on March 10. The broad-based 50-issue CNX Nifty of the NSE edged up by 12.45 points, or 0.19 per cent, to settle at 6,516.65.
The Nifty too formed a new lifetime high of 6,574.95 on Tuesday. Its previous peak was 6,562.85 on March 11.
The market witnessed some profit booking post the strong opening after the Monday holiday, which was led by strong US markets. It could also be a precursor to the US Federal Reserve meeting on Wednesday where it is expected to reduce quantitative easing. Nifty can correct to 6,400 if Ukraine situation turns bad or on a negative surprise from Fed, which is unlikely, said Vinod Nair, head-fundamental research, Geojit BNP Paribas Financial.
Goldman Sachs said in its report, The upcoming parliamentary elections could have an important bearing on policy choices and the progress of structural reforms. Adoption of more decisive and/or pro-growth policies could help boost investment activity and provide impetus to the overall growth cycle, in our view.
The US investment bank said its analysis of market moves, valuation changes and FII flows around previous elections suggests India may have more room for a pre-election rally than Indonesia.
However, it listed risk factors like any renewed concerns on emerging markets (on continued QE taper and rising rates) which may impact equities, an unclear result in the elections, which could exacerbate investor uncertainty and trigger potential capital outflows, and a slower-than-expcted growth pick-up or a faltering earnings recovery.
The Indian market has started 2014 on a strong note and is among the best-performing markets in the past month in US dollar terms, beating even the US.
The market has started to price in the possibility of a strong government coming in by May that could provide impetus to economic recovery. The BSE Sensex has moved up 8 per cent over the past month, and historical evidence suggests that markets can easily go up another 15-20 per cent just due to price-earnings re-rating, said a report by Macquarie Equities Research.
In past elections, strong governments were greeted with rallies in the market, with stocks moving up 20-25 per cent. The Indian economy has bottomed out, in our view, with GDP likely to post 4.7 per cent growth in FY14 as compared to 4.5 per cent in FY13, Macquarie said.