Domestic stock markets opened with substantial gains on Monday, with both benchmark indices hitting record highs following the Bharatiya Janata Party’s (BJP) decisive electoral victories in Madhya Pradesh, Rajasthan and Chhattisgarh.
The S&P BSE Sensex was trading 1.72 per cent or 1,163.39 points higher at 68,644.58 at around 2 pm, while the NSE Nifty 50 was up 1.79 per cent or 362.95 points at 20,630.85.
The broader market indices also witnessed substantial gains due to other favourable factors such as strong macroeconomic growth and global cues.
Following today’s stellar performance, investors are now wondering whether domestic markets will be able to sustain this momentum and if they should invest in the current circumstance.
On what investors should do, Santosh Meena, Head of Research, Swastika Investmart Ltd, said, “Nifty’s immediate target is 20,750, with the auspicious level of 21,000 easily within reach. The previous breakout level of 20,222 will serve as the market’s floor, and with the pre-election rally underway, the Nifty could climb towards 22,500 ahead of the general election.”
“The Fear of Missing Out (FOMO) and There Is No Alternative (TINA) factors will further fuel the market rally. With clear signs of political stability and India shining as a bright spot in the macroeconomic landscape, FIIs are left feeling compelled to invest, fearing they will miss out on the opportunities India presents,” Meena said.
This indicates that the domestic stock markets are likely to build momentum in the run-up to the general elections next year, provided no external factors play spoilsport.
Meanwhile, Manish Chowdhury, Head of Research, StoxBox, said, “We further expect markets to cement gains and won’t be surprised to see markets closer to the 22,000 levels before the general elections in 2024.”
“The image of the BJP as a pro-reformist and the performance of the economy on various fronts, especially during the Covid period and gloomy global economic situation, have provided market participants with confidence that a dual-aided right-wing government is beneficial in the longer term,” he noted.
“As we move closer to the 2024 general elections, we believe that the decisive win by the BJP in key states has sent a strong message to investors betting on India’s rising growth potential and position the country on a stronger footing as compared to its peers,” Chowdhury added.
Meanwhile, Vaibhav Shah, Fund Manager, Torus ORO PMS, pointed out that despite the ongoing rally, any negative news may lead to profit booking. “However, the current election results are priced in from a market perspective, and so we believe that there won’t be any major impact on the markets,” he added.
Arvinder Singh Nanda, Senior Vice President, Master Capital Services Ltd, said, “Some sectors that are expected to do better in the near term are the banking sector as they have attractive valuations and are backed with clean and healthy balance sheets, strong asset quality, and are witnessing robust credit growth. The auto sector is expected to rebound mainly due to growing incomes, growing demand, growth in infrastructure, favorable government policies, and urbanization.”
“The EV segment is also expected to grow in the coming years. The FMCG sector has been growing significantly in India over the past few years and is expected to do well in the future as its products are always in demand. The IT sector is also expected to perform well due to a shift in technology towards analytics, cloud computing, and artificial intelligence,” he added.
From a technical standpoint, Shrey Jain, Founder and CEO SAS Online, said, “The Nifty50 index is anticipated to find support in the 20,200-20,150 range, with a robust buy zone identified at 20,350-20,420.”
“With political stability and strong economic growth in the picture, there’s a possibility that the Nifty could reach the significant milestone of 21,000 by the end of this month,” he added.