The Indian stock market benchmarks, the Nifty 50 and the Sensex, soared to record-high levels in early trade on Monday, June 3, following exit poll predictions of a substantial victory for the BJP-led National Democratic Alliance (NDA) in the 2024 Lok Sabha elections. The Sensex opened 2,622 points higher at 76,583.29, compared to its previous close of 73,961.31, and surged by 3.8% to reach a new record high of 76,738.89.
Similarly, the Nifty 50 opened 807 points higher at 23,337.90, up from its previous close of 22,530.70, and increased by 3.6% to hit a fresh record high of 23,338.70 in early trading. This surge was driven by a wave of investor optimism across all market segments, with the midcap and smallcap indices also reaching new record highs, rising nearly 4% each.
The BSE Midcap index surged 4% to a new high of 44,560.97, while the BSE Smallcap index jumped 3.6% to a record high of 48,973.96. Nearly 200 stocks, including major players such as SBI, ICICI Bank, Axis Bank, Bharti Airtel, Larsen and Toubro, Mahindra and Mahindra, NTPC, and Power Grid, achieved fresh 52-week highs during intraday trading on the BSE.
In May, both the Nifty 50 and Sensex experienced a downturn, breaking a three-month winning streak due to heightened election-related volatility, with the India VIX surging 91% during the month. Despite this, the exit poll results provided a significant boost to market sentiment.
“Nifty has opened with a gap up primarily on the back of the exit poll numbers indicating a clean sweep for the BJP-led NDA government for the third time in a row. Apart from this, there were few other things which pushed the index higher like better-than-expected GDP numbers, the strong pullback in US markets on Friday, the arrival of monsoon and a reduction in fiscal deficit,” said Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities. Sheth suggested that traders should book profits at current levels and look to re-enter at dips around 23,000 to 22,800 levels, with a medium-term target for the Nifty at around 24,500.
Several factors contributed to the market’s record highs. Most exit polls predicted a third consecutive term for Prime Minister Narendra Modi’s NDA government, with the BJP-led alliance expected to secure over 350 seats. Key exit polls, including those by India Today-My Axis India, India TV-CNX, and News24-Todays Chanakya, even forecast over 400 seats for the NDA, while the opposition INDIA bloc was projected to win fewer than 200 seats.
Market analysts predict continued positive momentum, expecting the Nifty to reach new highs this week. Amit Goel, Co-Founder & Chief Global Strategist at Pace 360, anticipates the Nifty reaching approximately 23,200-23,300 levels and the Indian rupee appreciating to 82.75.
Supporting this optimism were strong GDP numbers and a better-than-expected fiscal deficit. India’s GDP grew by 7.8% in Q4FY24 and 8.2% for the full year FY24, surpassing estimates. The fiscal deficit for 2023-24 stood at 5.63% of GDP, slightly better than the 5.8% projected in the Union Budget.
Additionally, S&P Global’s recent upgrade of India’s rating outlook to positive, while maintaining its sovereign credit ratings at ‘BBB-/A-3’, further boosted market confidence. Broad-based buying was observed across sectors, with significant gains in banking, financial, metal, realty, and oil and gas stocks. The Nifty Bank index surged over 4% to a new record high of 50,990, while the Nifty PSU Bank index soared nearly 7%.
Positive global cues, including potential rate cuts in Europe and the US, as well as strong macroeconomic data from major Asian economies, added to the positive sentiment. Notably, Japan’s factory activity expanded for the first time in a year in May, and South Korea’s factory activity grew at the fastest pace in two years.
