Markets Gain Momentum Ahead Of Elections

The announcement of the schedule for 2019 Lok Sabha polls ushered in new excitement in the Indian markets. Investors are eager to shed the phase of uncertainty and move into a stable government scenario. This optimistic mood of the market participants was evident in the uptick seen in the benchmark indices during this fortnight. The BSE Sensex and Nifty outperformed their global peers, gaining more than 2 per cent. Moreover, the mid-caps and small-caps joined the party, moving up by more than 4 and 7 per cent, respectively. 

Various pre-poll forecasts have indicated that the BJP under Narendra Modi’s leadership has a fair chance of winning the general elections. Top psephologists are of the opinion that although the ruling BJP will lose seats, it will still manage to form the next government at the Centre. These forecasts seem to have improved investor confidence and have overtaken concerns about uncertainty and valuation. 

The sectoral indices that outperformed were led by the Small-Cap index. The BSE Small-Cap zoomed by 7.48 per cent, followed by the power sector, with the BSE Power index surging by 5.69 per cent. The BSE Mid-Cap was up by 4.48 per cent, Auto was up by 3.89 per cent, while Metal and Bankex were up more than 3 per cent during the fortnight. FMCG and Realty indices gained 2.23 per cent and 0.78 per cent, respectively. The BSE IT index was the only index in the red, down by 0.52 per cent. 

What is most pleasing about the recent market rally is that the foreign institutional investors (FIIs) are back in hordes. The fortnight’s institutional trading data indicates that the FIIs werenet buyers, while the domestic institutional investor (DIIs) were net sellers. FIIs were net buyers to the tune of Rs 20,464.09 crore, while DIIs were net sellers with an outflow of Rs 8,378.3 crore during the fortnight. 

On the global front, major economies were still facing the uncertainties arising from the US-China trade war. Both the countries are back to square one, after all the flurry of talks and posturing. The US President Donald Trump’s economic advisor Larry Kudlow said that the scheduled US-China trade deal might not happen at all and this news hit the US indices badly. Major US indices, Dow Jones Industrial, S&P 500 and the tech index Nasdaq tanked 2.23 per cent, 1.78 per cent and 1.59 per cent, respectively, during the fortnight. 

On the other hand, the European indices were mixed, as the UK’s FTSE 100 was down by 1 per cent,while the German DAX remained unchanged and the French CAC 40 was up 0.29 per cent. Asian markets were also mixed as Hang Seng dipped by 2.04 per cent, followed by Japan’s Nikkei which was down 1.87 per cent, while Shanghai Composite was up 5.91 per cent during the fortnight. 

The most tracked commodity, crude oil, saw an uptick following Saudi Arabia’s decision to cut oil exports to reduce the supply glut in the international oil markets. However, the US supplies were capping any significant gain in crude prices. OPEC is slated to meet next week on March 18 to review the level of crude oil production. 

Whatever be the election outcome, market participants are in an upbeat mood and ready to face any situation. Traders and investors both seem to be participating in the rally and with the FIIs coming back, markets are expected to see some exciting times, going ahead.