Markets Upbeat With End Of Election Uncertainty

Finally, we are done with the general elections. Now is the time for all sorts of permutations and combinations and to speculate on who will get which ministry and which party will benefit the most from its alliance with the ruling party. The market has already, to an extent, factored in that Narendra Modi will get a second term as Prime Minister. Echoing positive investor sentiments, the benchmarks index BSE Sensex posted a mammoth single-day gain of 1,422 points on Monday after the exit poll results were out on Sunday.

Investors’ enthusiasm is evident from the fact that the BSE Sensex traded comfortably above the 39,000 mark, up by 1.95 per cent, while the broader benchmark Nifty traded above 11,800, up by 1.98 per cent, during the fortnight. Also, sharing the euphoria were mid-cap stocks, with the BSE Mid-cap up by 1.04 per cent. However, the BSE Small-cap index declined by 0.30 per cent during the fortnight.

Gaining the most on a sectoral basis was the banking sector. This was evident from the fact that the BSE Bankex was up by 3.92 per cent in the fortnight, followed by Realty and FMCG indices, up by 2.65 and 2.25 per cent, respectively. During the fortnight, the BSE Auto was battered down a bit due to concerns around a slowdown in demand. However, the index recovered and was up by 1.78 per cent. The index that lost the most was the BSE Metal, down by 4.01 per cent. The metal sector has been impacted heavily by the trade war dispute between the US and China.

Globally, major international indices were bleeding with the trade war between the US and China worsening with no signs of resolution. The new tariffs imposed against Chinese goods by the US President Donald Trump are leading to resentment against the US in China, which is expected to hit back at American business in China. Meanwhile, Chinese Premier Xi Zingping has indicated that China is heading for a protracted trade war with the US and called on his people to get prepared for hardships. All the major US-based indices tanked, with the Nasdaq dipping the most by 5.18 per cent, followed by S&P 500, down by 3.15 per cent and Dow Jones Industrial, down by 2.87 per cent, during the fortnight. The European indices were also stressed with the UK-based FTSE 100 down nearly 1 per cent, while the German DAX down 2 per cent and the French CAC 40 down 2.28 per cent. Having to face the direct consequences of the trade tensions, major Asian indices were down considerably. Hong Kong’s Hang Seng was down by 4.87 per cent and the Japanese Nikkei was down 4.30 per cent, followed by the Shanghai Composite, which slid 1.23 per cent during the fortnight.

Foreign institutional investors (FIIs) turned net sellers during the fortnight, while the domestic institutional investors (DIIs) were net buyers. FIIs registered an outflow to the tune of Rs. 5,546.43 crore, while DIIs were net buyers with an inflow of Rs. 9,064.65 crore, during the fortnight.

In the international market, the crude oil prices remained elated but showed signs of retreat due to trade war concerns. Brent crude futures were trading near the US$71.80 per barrel mark. The US crude stockpiles have increased during the fortnight but Saudi Arabia is expected to balance the market by cutting supplies.

With the uncertainty around the elections behind us, the market’s focus is going to return to fundamentals, potential growth drivers and policy reforms for different sectors, as well as the economy as a whole. Given India’s growth story, the markets are expected to do well, be it with Modi or without Modi, the only difference being with Modi, the policy path seems more clear and robust. 

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