Indian equity markets reached unprecedented levels on Monday, June 3, driven by exit polls suggesting that Prime Minister Narendra Modi and his BJP-led NDA are likely to win a third term with a strong mandate. This optimistic political forecast significantly boosted investor confidence. The BSE Sensex opened the trading day at a record high, soaring 2,178 points, which is a 2.94 percent increase, reaching a new peak of 76,139. The positive sentiment wasn’t limited to the Sensex; the Nifty50 index also experienced a substantial rise. It jumped 579 points, or 2.57 percent, to trade at 23,109 by 9:17 am.
As the morning progressed, the upward trend continued. By 10:20 am, the Sensex had slightly adjusted but was still up by 2,118.84 points, standing at 76,080.15. Meanwhile, the Nifty50 rose further, gaining 665.60 points to reach 23,196.30. These sharp increases reflect the market’s positive reaction to the anticipated political stability and continuity in economic policies under PM Modi’s leadership.
The broader markets also saw a significant rally, mainly due to a sharp drop in market volatility. This drop in volatility made investors more confident and optimistic about the market’s future. Investors believed that under Prime Minister Modi’s leadership, there would be continued investment in key areas like infrastructure and manufacturing. This positive outlook led to strong performances in specific market indices. For instance, the Nifty Energy, Nifty PSU Bank, and Nifty Realty indices all saw substantial gains, rising by 4 to 5 percent.
Additionally, the total market value of all companies listed on the BSE (Bombay Stock Exchange) jumped by over Rs 11 lakh crore. This massive increase in market value significantly boosted the wealth of investors.
Key sectors of the economy, including public sector banks (PSU banks), oil and gas, financial services, metals, real estate (realty), and the automotive industry (auto), experienced gains ranging from 3 to 5 percent. These sectors’ strong performance contributed to the overall rally in the market.
Prashanth Tapse, Senior Vice President (Research) at Mehta Equities Ltd, stated that Dalal Street, the financial district in Mumbai, is set for a robust beginning in June due to optimistic exit poll results indicating a significant win for the BJP-led NDA. This prediction has bolstered investor confidence, leading to a positive market reaction.
Ravi Singh, Senior Vice President of Retail Research at Religare Broking, echoed this sentiment, highlighting that all exit polls forecast a BJP victory. This expectation has already positively impacted the markets, as investors anticipate stable and business-friendly policies under the BJP’s continued leadership. However, Singh cautioned that election-related uncertainties could still cause market volatility. He advised investors to be prepared for potential market fluctuations but to remain hopeful for a sustained rally if the final election results confirm the exit polls’ predictions.
Exit polls suggest that the BJP-led National Democratic Alliance (NDA) is likely to win approximately 370 seats in the Lok Sabha election on June 4. If these predictions become reality, then the BJP-led NDA will secure a decisive victory, providing Prime Minister Narendra Modi with the political strength needed to push forward with significant reforms. Market experts believe this strong mandate will enable Modi ji to implement more challenging land and labour reforms, which have been considered essential for boosting economic growth but difficult to enact due to political resistance.
Investors are also optimistic that a strong win for the BJP-led NDA will ensure the continuation of Modi’s initiatives to position India as a global manufacturing hub. This involves attracting major international companies like Apple and Tesla to set up production facilities in India, thereby reducing their dependence on China and fostering economic diversification and growth in India.
India’s GDP growth numbers for the fiscal year 2023-24 (FY24) and the fourth quarter, which were unveiled last week, played a significant role in fueling today’s positive market rally. The country’s economic growth surged to an impressive 8.2 percent for the financial year ending March 2024. This remarkable expansion was primarily propelled by substantial government investments in infrastructure projects and a booming real estate sector.
Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd., also highlighted several key factors that contributed to this economic upswing. Firstly, the GDP growth rate exceeded the prior projections and reached 8.2 percent for FY24. Additionally, there was a notable increase of 574 points in the Dow Jones index, which is a widely followed indicator of the US stock market. There were increased speculations of a potential interest rate cut in September, which further buoyed investor sentiment.
Moreover, the rain came early this year, which is important for farming. This is good news for agriculture, which is a big part of India’s economy. Also, the government collected more Goods and Services Tax (GST) in May, jumping by 10 percent to hit Rs 1.73 lakh crore. This rise in GST collections shows that different parts of the economy are doing well, making people more confident about the country’s economic growth.
Overall, these factors collectively contributed to the optimistic outlook on economic prospects of India. They also reinforce investors’ confidence and drive the positive momentum witnessed in the stock markets.
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