Stocks rebounded from oversold levels on growing expectations that the BJP-led National Democratic Alliance (NDA) would form the government.
Analysts say markets are likely to remain volatile until a government is formed and there is limited scope for further upside at present. The NSE Nifty rose 735.85 points or 3.36 percent to close at 22,620.35. It has been volatile this week and has fallen 0.10 percent in the past five trading sessions. The BSE Sensex rose 2,303.19 points or 3.2 percent to close at 74,382.24. It is up 0.31 percent in the week since May 30. Banking, metals and consumer stocks led the gains.
“We will continue to see some volatility as the market waits for the government to be formed,” Andrew said.
Holland, CEO of Avendus Capital Public Markets Alternative Strategies. “Once business as usual is established, we expect to see continued growth in the defense, renewable energy, power and infrastructure sectors as governments are expected to invest in these sectors.”
Nifty metal, private sector bank, FMCG and auto indices rose between 4.3 and 5.8 per cent and were the top gainers of the day.Of the total 3,918 stocks traded on the BSE, 2,597 stocks advanced while 1,221 declined.
ET StationBanking, FMCG and pharma stocks likely to perform well
The risk-averse sentiment took hold on Tuesday after the BJP failed to secure the number of seats needed to form a government on its own in the general election, with investors worried that the presence of a coalition partner could delay the BJP-led government’s plans to push through key market-friendly economic policies.
“Nifty bounced back from oversold territory on Wednesday and short-term support is at 22,200 levels. Nifty is likely to move towards 22,900 in the coming days,” said Dharmesh Shah, head of technical at ICICI Direct.
Shah expects banking, FMCG, pharma and infrastructure stocks to perform well in the near term.
Holland said there was widespread doubt in the market about whether the new government would focus on capital investment or consumption, but the Reserve Bank of India’s (RBI) increased dividend gives it the leeway to focus on both, and further details would be revealed in the budget due in July.
The RBI paid a higher-than-expected dividend of Rs 2.1 trillion to the government in FY24.
Clarification after budget formulation
“India has enjoyed a premium based on the fact that it has a BJP-led government with a majority, but it may now lose that premium and have to regain market confidence,” Holland said. “Investors could also choose to wait on the sidelines and wait for clarity from the budget before buying into depressed stocks.”
The Nifty Volatility Index (VIX), a fear gauge, fell 29.4 per cent to 18.88 on Saturday after rising over 100 per cent in the month before the vote counting on June 4. “The VIX has fallen almost 30 per cent in a day, indicating that market fear is shrinking and markets are likely to stabilise in the coming days,” Shah said.
At Wednesday’s close, the Nifty Midcap 150 was up 3.86 per cent and the Nifty Small-cap 250 was up 3.31 per cent.
