People stand in front of the Bombay Stock Exchange. File. | Photo credit: FRANCIS MASCARENHAS
Stocks opened at record highs on June 3 after weekend exit polls pointed to a third term for Prime Minister Narendra Modi
The NSE Nifty 50 index rose 3.58% to 23,337.90 points while the S&P BSE Sensex gained 3.55% to 76,652.84 points at 9:15 am ET.
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Both indices reached record highs and recorded their largest intraday gains since February 1, 2024.
Growth in all 13 major sectors. Broader, more domestically focused small- and mid-cap companies gained about 3% each.
Exit polls
Weekend exit polls showed that the alliance led by Prime Minister Modi’s Bharatiya Janata Party (BJP) would escalate its 303 seats in the 543-member lower house.
The win was widely expected, but if confirmed in official results released on Tuesday, the margin would be larger than analyst forecasts and would be seen as positive for stock markets, which have reached record highs thanks to economic growth.
“We have always believed that the economic progress that most Indians have made over the last 10 years was enough for Modi to be easily re-elected,” said Rob Brewis of British firm Aubrey Capital Management.
“If this result is confirmed, I think it will be a real vote of confidence and Modi can now really move on. So maybe we can achieve the faster growth we need. The markets should like it.”
Read also | GDP growth skyrockets to 8.2% thanks to manufacturing growth
Continuity
Data showed last week that India’s economic growth accelerated to 8.2% in the fiscal year ending March 2024, buoyed by government spending on infrastructure and a boom in the real estate market.
Analysts believe that if Modi’s victory is as powerful as exit polls indicate, he will have the political capital to continue working and perhaps even push for tougher land and labor reforms.
“If exit polls prove correct, this will be a vote for continuity,” Citi analysts wrote in a note to clients.
“We expect stocks with positive exposure to infrastructure/logistics and industrial/manufacturing focus to perform well over the medium term,” they said, naming Adani Ports, conglomerate Larson & Toubro and Bharat Electronics among the likely beneficiaries.
Investors also expect the Modi government to continue to focus on turning the country into a manufacturing hub – a project that has encouraged foreign companies including Apple and Tesla to set up production as they diversify away from China.
Foreigners, who pumped a net $20.7 billion into Indian stocks last year but withdrew before the election, may also see the vote result as an excuse to buy.
“Most clients we met in recent months seemed to conclude that political continuity would contribute to a stable macroeconomic environment and continued reforms,” Goldman Sachs analysts said.
