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Stocks zoom as state polls give clear mandate


A landslide victory for the Bharatiya Janata Party in the key state of Uttar Pradesh boosted investor sentiment, sending stocks higher. The party is also set to retain power in Uttarakhand, Goa and Manipur.

“Markets hate uncertainty, and the outcome of these state elections will provide policy continuity and stability,” said Devarsh Vakil, deputy head, retail research, HDFC Securities. The Union government will now be encouraged to carry out its agenda confidently and look for opportunities to pursue economic reforms, he added.

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A shot in the arm

The benchmark Nifty and Sensex indices gained 1.53% and 1.5%, respectively.

Apart from favourable global cues, a sharp pullback rally in crude oil and other commodities during previous trading sessions also boosted investor sentiment.

Aishvarya Dadheech, a fund manager at Ambit Asset Management, said “the markets saw a swift recovery post a sharp pullback in commodities prices after Ukraine hinted at midway talks. Back home, strong performance of the incumbent party in the state elections also provided much-needed support to the market”.

The outcome of state polls removed the political instability risk in India for at least two years, Dadheech said.

Though the indices ended in the green, volatility was seen in intraday trading. Vinod Nair, head of research at Geojit Financial Services, said weak western markets ahead of the release of key European and US economic data and a rise in crude prices added to volatility.

“In the past, clear political mandates have led to euphoria in markets though that is unlikely to be the case this time around,” Vakil said. Macroeconomic factors are not conducive for markets, with higher crude prices likely to stoke inflation, according to Vakil. Investors are cautious as central bankers are unwinding their loose monetary policies, which they say will keep markets in check at higher levels.

Dadheech said investors will need to be vigilant because the uncertainty of geopolitical standoff is looming large. Commodity prices are least likely to see a secular downturn even after the Russia-Ukraine conflict subsides because sanctions will continue to disrupt the global supply chain, he said. Unless sanctions are withdrawn, global markets may remain volatile, and India will not be insulated, he added.

The volatility in the commodities space continued on Thursday. Brent crude prices, which fell more than 11% to $118.51 a barrel during the previous trading session, were trading higher at $122.90 a barrel on Thursday.

Lower oil prices are necessary for supporting the rupee. Anindya Banerjee, vice-president for currency derivatives and interest rate derivatives at Kotak Securities Ltd, said the “rupee is not out of the woods, as oil prices remain well supported above 100 dollars on Brent”. Banerjee expects a range-bound play over the near term between 76 and 77 to a dollar on the spot.

The risk-off sentiment prevailed, and foreign portfolio investors remained sellers. FPIs, who have sold more than 1.11 trillion worth of equities till 9 March, remained on the selling mode on Thursday, too. On the other hand, domestic institutional investors bought 9,170 crore worth of equities on Thursday.

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