The BSE Sensex closed at a new all-time high of 22,764.83, a gain of 0.6% or 135.99 points, and the broader 50-share Nifty closed at 6,817.65 points, up 0.56% or 38.25 points. This is the second consecutive day the market has rallied after Federal Reserve chairman Janet statement last Wednesday that the US job market still needed help from the Fed and that the central bank must remain intent on adjusting its policy to respond to unforeseen challenges.
Foreign institutional investors (FIIs) bought $35-million equities on Monday, provisional BSE data show, taking year-to-date purchases to $4.8 billion. Ten Sensex companies and 105 BSE 500 companies have hit all-time high in CY14.
The BSE Sensex is now among the best performing market this year. Sensex has returned 9.87% in dollar terms beating China's Shanghai Composite (-5.12%), Taiwan Taiex (2.52%), South Korea's Kospi (0.74%) and Hang Seng (-2.34%).
India has outpaced several of its peers in overseas inflows in year-to-date. The countrys FII inflows of $4.8 billion are higher than Indonesia's $2.8 billion and South Korea's $3 million. FIIs have offloaded shares worth $25 billion from Japan.
Overseas investors have become increasingly confident the election would bring a stable government at the Centre. Concerns about corporate earnings appear to have been brushed aside for the moment in a hope that a stable and efficient government will kickstart growth.
However, brokerages are a bit cautious. Much of this hope (of a strong government) is based on opinion polls. However, our interactions with investors suggest the markets may be disappointed on May 16, (the result date) if the NDA get less than 230-240 seats. In this context, we note that opinion polls have been dramatically wrong in the past, said a recent report by BNP Paribas. For instance, in the three months after the 2004 election results, the market underperformed, led by high beta sectors as the the opinion polls were wrong and the markets were disappointed about the formation of a left-of-centre government in New Delhi, said the report.
The brokerage also said experiences in 2004 or 2009 suggested that having a rainbow coalition could make structural reforms difficult to implement. As was the case during the current presidents tenure, some political capital may have to be used for political management, leaving less to push through structural reforms, said the report.
HSBC Global Research said investors should be careful about assuming significant differences in policy agenda between the two main alliances. While the NDA has been in power fewer times, there is no clear evidence that this coalition would change economic policies dramatically. Based on previous experience, there is also no certainty a strong mandate would deliver change and a more positive growth story. The UPAs relatively solid mandate after the 2009 election is a reminder of that, said HSBC in a recent research report note.
Asian equity markets were little changed on Monday, as tensions in Ukraine kept investors cautious amid an absence of fresh cues. Hang Seng and Straits Times were up marginally, while Nikkei 225 and Kospi posted maginal losses. China's Shanghai Composite declined the most at 1.5%. Major European indices were closed on account of Easter.
Back home, eight of 12 BSE sectoral indices gained, with BSE Bankex (1.34%), BSE Metal (2.23%) and BSE Capital Goods (2.91%) being top gainers of the day. The market breadth was strong with 1,775 advances compared with 1,039 declines.
India VIX, a volatility index based on the CNX Nifty index option prices, rose 11.4% on Monday to its 30-month high of 34.38.