Markets have stopped trading for the day as the benchmarks hit another upper circuit Monday as soon as the trade resumed after 2 hour break. Investors are euphoric after the United Progressive Alliance emerged victorious in the 2009 general elections. Bombay Stock Exchange’s Sensex was locked at 14272.62 up 2099.21 points or 17.24 per cent. National Stock Exchange’s Nifty was locked at 4308.05, up 636.40 points or 17.33 per cent. According to media reports turnover including cash and F&O was less than Rs 1000 crore.
Market men are upbeat given the fact that there will be no interference by the Left Parties and other regional parties in day-to-day functioning of the government and less number of allies will lead to a stable government which will run its course of five years.
BHEL (32.72%), Larsen & Toubro (29.53%), DLF (25.82%), ICICI Bank (25.30%) and HDFC (23.46%) were the top Sensex gainers. Amongst the sectoral indices, BSE Realty Index was up 25.37 per cent, BSE Capital Goods Index gained 23.47 per cent, BSE Bankex moved 20.27 per cent higher and BSE Oil & gas Index advanced 19.57 per cent. Market breadth was positive on the BSE with 833 advances and 11 declines.
The new government which is likely to be sworn in by Friday is expected to come-out with full budget within 45 days of resuming office, according to media reports.
Reforms in the banking sector, divestment of public sector undertakings, infrastructure, retail sector and insurance sector is likely to top the priority list.
Sensex had opened 10.73 per cent or 1305.97 points higher at 13479.39 points to 12011.10. National Stock Exchange’s Nifty was locked at 4203.30, higher by 14.48 per cent or 531.65 points.
Market expert’s views:
“Markets had previously worried that gains by leftist and smaller regional parties would weigh on the reform agenda and lead to a further blow-out in the already large fiscal deficit. In previous elections, both BJP- and Congress-led alliances had been unable to push through reforms, held down by allies with their own agendas. The government’s rural jobs program and strong private sector investment have highlighted the positive effects of economic reform and liberalisation, and voters’ shunning of smaller parties imply a desire for greater action on the reform front,” said a Moody’s Economy.com report.
The report added, “Despite the strong endorsement from voters, the government is likely to have a tough job pushing through some much-needed reforms. Political constraints mean a scrapping of fuel subsidies are unlikely, nor reforms to outdated labour laws that constrain hiring and create high firing costs. Returning to the path of fiscal consolidation will also be challenging if the global recession becomes protracted, while the financial crisis will mean any steps to liberalise capital flows and foreign investment will be cautious.”
Madhabi Puri Buch, MD & CEO, ICICI Securities said, “The mood of the moment is clearly upbeat. The largest and most complex election process on the planet is complete. The impact of the results on the markets is clearly positive – both in the short term and long term. In the secondary markets and the primary markets.”
“It is almost as though investors had pressed the pause button on major decisions on account of uncertainty. With the clear mandate to the new government and the strong expectation of stability for the next five years, the play button will be on. If global cues continue to be positive, the play could even become a fast forward,” Buch added.
Dinesh Thakkar, CMD, Angel Broking said, “The election results have come as a positive surprise and are expected to go down well with the markets considering that markets like continuity of government policies, mindsets and ideologies. The UPA’s 250+ tally has managed to beat the most optimistic political analyst on the street and this ‘thumping’ victory has set the stage for the Congress led UPA to come back to power. Further, the possibility that the UPA could form the government without the Left will further soothe investors’ nerves. The markets are expected to rally as fresh money from FIIs and those waiting on the sidelines on account of the political uncertainty, makes its way into Indian stockmarkets. Investors must remain ‘long’ on India to take advantage of the long-term wealth creation opportunities that Indian stockmarkets have to offer.”