People stand outside the Bombay Stock Exchange. File.
| Photo Credit: FRANCIS MASCARENHAS
Shares opened at record highs on June 3, after exit polls over the weekend exit polls pointed to a third term for Prime Minister Narendra Modi
The NSE Nifty 50 was up 3.58% at 23,337.90 points, while the S&P BSE Sensex gained 3.55% to 76,652.84 points, as of 9:15 a.m. IST.
Also read | How do markets look at election results?
Both indexes hit record high levels and logged their best intraday gains since Feb. 1, 2024.
All 13 major sectors rose. The broader, more domestically-focussed small- and mid-caps gained about 3% each.
Exit polls
Weekend exit polls projected the alliance led by PM Modi’s Bharatiya Janata Party (BJP) to increase its 303 seats in the 543-member lower house.
A win had been widely expected but, if confirmed in official results due on Tuesday, the margin will be larger than analyst forecasts and seen as a positive for equity markets that have scaled record highs on the back of economic growth.
“We had always felt that the economic progress made by most Indians over the last 10 years was sufficient to see Modi re-elected with ease,” said Rob Brewis at UK-based Aubrey Capital Management.
“If this result is confirmed then I think it is a real vote of confidence and Modi can really press ahead now. So maybe that faster growth we need can be attained. The markets should like that.”
Also read | GDP growth surges to 8.2% on manufacturing gains
Continuity
India’s economic growth accelerated to 8.2% in the financial year to March 2024 led by government spending on infrastructure and a boom in real estate, data showed last week.
If a Modi victory is as strong as indicated by the exit polls, analysts think he would have the political capital to keep going and perhaps even push for tougher land or labour reforms.
“If exit polls prove correct, it would be a vote for continuity,” analysts at Citi said in a note to clients.
“Medium-term, we expect stocks positively exposed to the focus on infrastructure/logistic and industrial/manufacturing to do well,” they said, noting Adani Ports, conglomerate Larson & Toubro and Bharat Electronics as among likely beneficiaries.
Investors also expect the Modi government to continue focusing on turning the country into a manufacturing hub — a project that has courted foreign companies including Apple and Tesla to setup production as they diversify beyond China.
Foreigners, who poured a net $20.7 billion into Indian equities last year but had pulled back ahead of the election, may also see the vote’s conclusion as an excuse to buy.
“Most clients we met with in recent months appeared to infer that political continuity would contribute to a stable macro-economic environment and continuing reforms,” said analysts at Goldman Sachs.
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