Domestic equity benchmarks Sensex and Nifty hit fresh record highs on Thursday as early trends in vote count signalled the return of the NDA Government for a second term.
Analysts said volatility will rule the roost on Dalal Street through the day amid expiry of weekly index options, which will contribute to the choppiness.
The 30-share Sensex scaled a new high of 39,901 and was eyeing the psychologically important 40,000 mark, while 50-pack Nifty topped 11,883 and looked headed for Mount 12,000.
Historical data suggests the stock market has never disappointed market participants on election results day since 2004.
In 2014, BSE benchmark Sensex scaled the 25,000 mark for the first time on the results day on May 16, when the Narendra Modi-led BJP was voted to power. The index closed 0.90 per cent higher at 24,121.
In year 2009, the market created a history and hit two upper circuits after the UPA won a second term on May 18. As election results day was a Saturday, the Sensex soared more than 2,000, or 17 per cent, on the next trading session to hit 14284 mark.
That was the first time in the history of the domestic equity market when trading was halted due to the benchmark indices hitting upper circuits.
In 2004, the Sensex gained 0.77 per cent after the UPA won the election on May 13. Thereafter, the index plunged 6 per cent and 11 per cent over the next two sessions.
Siddharth Sedani, Vice-President for Equity Advisory at Anand Rathi Shares and Stock Brokers, said Thursday’s session will be volatile for the market as election leads start coming in.
“In the medium to long term, we see a stronger market on the back of earnings revival from the second quarter onwards amid hopes of recovery in consumption as well as rural demand,” he said.
Milan Vaishnav, Technical Analyst, Gemstone Equity Research and Advisory, said: “Strong volatility cannot be ruled out in the market due to the election results and weekly index options are set to expire later in the day.”
Options data at the end of Wednesday’s trade showed strike price 12,000 had the highest buildup of call open interest. Nifty closed 0.25 per cent higher at 11,737 on Wednesday.
“The best poll result is not expected to take Nifty beyond the 12,000 mark. On the other hand, highest Put open interest is at 11,500. This level may extend mild support if the index sees volatile moves,” said Vaishnav.
BSE Sensex has delivered positive returns to investors during election years on eight occasions out of 10 since 1980. The index rallied nearly 30 per cent in calendar 2014, 81 per cent in 2009, 13 per cent in 2004 and 64 per cent in 1999. The two instances when the 30-pack dipped in an election year were 1998 and 1996, when Sensex gave up 17 per cent and 0.8 per cent, respectively.
India’s benchmark equity indices have rallied around 8 per cent so far this calendar. Naveen Kulkarni, Head of Research at Reliance Securities, said, “Our December 2019 target for Nifty50 index is 12,500.” That indicates a further 6.50 per cent rally from the current level.
Source: Economic Times