A day after witnessing the worst trading session in four years, benchmark indices Sensex and Nifty recovered almost half of their losses on Wednesday after gaining over 3% each.
The 30 share BSE Sensex closed at 74,382.24, up 2,303.19 points or 3.2 per cent. Nifty closed at 22,620.35, upturn 735.85 points or 3.36%.
Sensex fell 4,389.73 points or 5.74% and Nifty 50 fell 1,379.4 points or 5.93% on Tuesday due to the unexpected Lok Sabha election result. Bharatiya Janata Party (BJP) got 240 seats, which is much less than the exit poll estimates. However, the BJP-led National Democratic Alliance (NDA) secured 294 seats, ensuring a third term for Prime Minister Narendra Modi.
Analysts said the rise in the indices on Wednesday was due to investors absorbing the unexpected Lok Sabha election results. The market bounce was supported by domestic institutional investors (DIIs), while foreign portfolio investors (FPIs) remained net sellers of local stocks for the second consecutive day. FPIs sold equity worth Rs 5,656.26 Crore.
“The Indian market has displayed a bullish recovery led by broad-based buying across sectors as political stability looks assured,” said Vinod Nair, Head of Research, Geojit Financial Services.
Analysts say that NDA will form the government at the center but with fewer majorities. However, the new government will follow an investment-led economic agenda.
“NDA will form Modi 3.0 government with alliance partners. This is likely to give the market confidence in political stability as well as policy stability. Hence, some positive improvement is expected going forward,” Axis Securities said in a report.
The report said that policy reforms are likely to continue in Modi 3.0, but some situation may move towards populist measures, which could create challenges on the fiscal prudence path.
Market capitalization of BSE-listed companies rose by Rs 13 lakh Crore to Rs 408.06 lakh Crore after falling by over Rs 31 lakh Crore to Rs 394.83 lakh Crore on Tuesday. India VIX, the volatility index, which surged 51 per cent to 31.71 during intraday trades on Tuesday before closing at 26.75, fell 30% to close at 18.89.
On Wednesday, domestic institutional investors (DIIs) became buyers of equities after buying shares worth Rs 4,55,08 Crore. He sold equity worth Rs 3,318.98 Crore in the previous day.
According to provisional BSE data, FPIs have sold domestic shares worth Rs 18,092.48 Crore in the last two trading sessions.
Deepak Jasani, head of retail research at HDFC Securities Ltd, said the FPI outflow in recent days was mainly due to relatively expensive valuations of Indian equities (vs markets like China) ahead of the elections, the outcome of which was uncertain.
Shares of Power Grid Corporation, State Bank of India and NTPC rose 0.96 percent, 1.86 percent and 2.88 percent respectively. Nifty PSE rose by 2.51 percent and Nifty CPSE rose by 2.17 percent. On Wednesday, both the indices had fallen by more than 15 percent.
Top gainers on NSE include Adani Ports (7.29 percent), IndusInd Bank (7.06 percent), Hindalco Industries (6.46 percent), Tata Steel (6.32 percent) and Mahindra & Mahindra (6.06 percent).
