Indian stocks soared on Friday, ahead of the exit polls for the 2019 general elections to be made public on Sunday, the last phase of polling. The Sensex gained a smart 537.29 points or 1.44% to close at 37,930.77, suggesting investors are pricing in the formation of a stable government. The broader Nifty rallied 150.05 points, or 1.33%, to end the session at 11,407.15.
The rally was broad-based with mid-caps also posting gains. The Bank Nifty rallied a remarkable 594.85 points over the previous close.
With Friday’s gain, the Sensex has added about 816 points in the last two sessions.
Interestingly, foreign portfolio investors (FPI) were sellers on Friday,offloading stocks worth around $150 million, provision data from the exchanges showed.
Overseas investors have offloaded shares worth $697.2 million so far in May and have been sellers in nine out of the 12 sessions.
Market watchers said domestic institutions, which have been sellers for the most part of 2019, were back in buy mode. Some of the rise in stock prices was attributed to short–covering ahead of the weekend and the exit poll results. Fund managers said the investors had brushed aside macro concerns such as rising crude oil prices, which are nudging $73 per barrel, the weakening rupee which closed below the 70 mark at 70.22 and the trade war between the US and China.
“The poor results for Q4FY19 from companies which are reflecting weak demand seem to have been forgotten for the moment in the hope there will be a stable government,” a senior fund manager said. A spectacular set of numbers from Bajaj Finance, which saw profits jumping 54.5% year-on-year for the March quarter, saw the stock surging 6.09% to a hit a fresh high of Rs 3301.20 on BSE. Among the Nifty constituents, Bajaj Finserv, Kotak Mahindra Bank, Titan Co and UPL also hit new highs on Friday.
Overseas investors have picked up stocks worth over $9.1 billion so far in 2019, against last year’s outflow of $4.6 billion. On the other hand, the domestic institutional investors (DIIs) have sold shares worth $ 1.14 billion between January and now, Bloomberg data showed.
India remains one of the most expensive markets in the world. At its close of 37,930.77 on Friday, the Sensex now trades at a price-earnings (PE) multiple of 18.02 times to the estimated one- year forward earnings, against the long-term average PE of 16.7 times. This compares with 10.8 times for Kospi and 13.5 for Jakarta Composite. Russian and Turkish equities were the cheapest in the emerging market with a forward price-to-earnings ratio of 5.7 and 5.3, Bloomberg data showed.
Historically, Indian equities have traded at an average PE premium of 26% to the Asia pacific region, excluding Japan.
Of the 19 sectoral indices compiled BSE, barring Healthcare, IT, Metal and Tech, all ended the day in green with BSE FMCG and Finance gaining as much as 2.3%. The overall breadth of the market was largely positive, with 1,374 gainers against 1,141 losers on the BSE. On the NSE, 1,020 stocks ended in the green against 771 stocks closing lower.