Exit poll predictions of a good BJP showing in assembly elections today lifted sentiments in markets with the Sensex surging over 249 points to a one-month high and the Indian rupee strengthening 30 paise against the dollar.
Analysts attributed the market behaviour to expectations of a new government under BJP in the 2014 elections to be more business-friendly and bring fresh policies to boost growth.
Stocks and the Indian rupee opened with strong gains after results for exit polls for four states were released yesterday night with most predicting that BJP would be the leading party in Rajasthan, Madhya Pradesh, Chhattisgarh and Delhi.
The S&P BSE Sensex started on a positive note and climbed as much as 457 points to an intra-day high of 21,165.6.
Profit booking pared the gains and the index closed at 20,957.81, up 249.10 points or 1.2 per cent. This is its highest closing level since 20,974.79 on November 5.
The CNX Nifty on the National Stock Exchange spurted 80.15 points, or 1.3 per cent, to 6,241.10. The SX40 on the MCX Stock Exchange rose 120.07 points to end at 12,427.14.
Similarly, the rupee soared to a new one-month high of 61.53 against the US dollar and closed at 61.75, a gain of 30 paise against the greenback. It had closed at 62.05 yesterday.
"Market players (especially FIIs) are betting on the opposition party BJP gaining majority in the four states. If that holds true, then on Monday we think the markets will discount the outcome of the general elections to be held in May/June 2014," said Shrikant Chouhan, Head - Technical Research, Kotak Securities.
The state polls results will be announced on December 8 (Sunday).
"We believe that a stable government following the 2014 general elections could remove one key source of uncertainty and support a more sustainable growth uptick," Nomura said, noting the exit polls may differ from the official results.
Bank of America Merrill Lynch said results in line with the exit polls would be positive for the market, which is looking for a strong, stable government after the 2014 polls.
Shrikant Chouhan, Head- Technical Research, Kotak Securities:
Today the market opened up with a huge gap on 6,260 levels, which was beyond the expected uptick on the back of exit polls. It further went on to reach a high of 6,300. But it failed to cross current 52 week high 6,343 and all time high 6,357 that has again paused the sentiment. During the