Mumbai: The Sensex and the Nifty scaled new all time highs reacting to BJP-led Natio-nal Democratic Alliance’s decisive win in the general elections. But profit taking followed as the overhang of the big event got over with benchmark indices recording the worst intra-day fall in more than 10 years.
As early trends showed that NDA was coming back to power, the market opened on a bullish note and rallied more than 1,000 points and the Sensex crossed 40,000-mark for the first time and touched an all-time high level of 40,124 points. But it was quite a volatile day.
With the massive 3.75 per cent rally on Monday just after the exit polls having already priced in the outcome of general elections, it was time to book profit.
The broader Nifty 50 index also crossed the 12,000-mark for the first time and made a new all time high of 12,041.15 before consolidation in the market started.
The market is likely to see less volatility from Friday onwards, with the volatility index, India VIX, falling 29.77 per cent to 19.40 after it had touched a four-year high of 30.18 on Wednesday.
Goldman Sachs in a note said a decisive majority for the NDA is bullish for the market. “We are overweight Indian equities and expect Nifty to continue its out-performance relative to the rest of the region,” it said.
Analyst said the decisive mandate removed the overhang in the market of a fractured mandate and would facilitate decision-making and structural reforms by the Centre.
Motilal Oswal, Chaiman and MD, Motilal Oswal Financial Services, said, “Improvement in sentiment post the formation of a stable government should augur well for foreign institutional flows as well as domestic mutual fund inflows. Stable macros are also positive for currency and bond markets.”
Though Prime Minister Narendra Modi’s second term will see continuity of economic policies in the next five years, analysts and economists claim that the key challenge remains continuity in reforms.
Credit rating major Moody’s on Thursday expressed hope that the country would continue on the fiscal consolidation path, but cautioned that its credit view on India will depend on policies of the new government in its new tenure.
“Moody’s expects the broad push towards fiscal consolidation to remain, although with greater policy emphasis on supporting low incomes,” said William Foster, Vice President, Sovereign Risk Group, Moody’s Investors Service.
In a note, IHS Markit said the BJP still does not have a majority in the Rajya Sabha, and this will pose hurdles to the party’s legislative reform agenda.
“India is forecast to become the world’s fifth-largest economy in 2019, reaching a total GDP size exceeding $3 trillion, and overtaking its former colonial ruler, the UK. By 2025, Indian GDP is also forecast to surpass Japan, which will make India the second-largest economy in the Asia-Pacific region,” it said.
Arun Singh, chief economist at Dun and Brads-treet, said the new government will have to face the challenges that are inhibiting the current growth momentum and brace the economy from external challenges....