In yet another historic feat, the Indian stock market achieved another milestone today. The Nifty50 scaled the 23,000 mark for the first time, before slipping a few points intra-day. Meanwhile, the 30-share Sensex has also reached a new record high, climbing above the 75,500 level for the very first time. Nifty has gained nearly 1,200 points or over 4% in just 10 sessions, outperforming most global stock markets.
Earlier this week, Indian markets also touched the 5-trillion rupee market cap mark, adding one trillion in just a hundred and seventeen days.
What’s driving this unprecedented rally? Let’s try and understand five factors that are pushing the bulls forward.
The Biggest Factor – Lok Sabha Elections
The most recent 1,000-point surge for the Nifty began on May 13, coinciding with the fourth phase of the ongoing general elections. Investors celebrated the improved voter turnout in the fourth and fifth phases, particularly as more Northern states cast their ballots, where the BJP-led NDA government has a stronghold.
Political leadership’s stated confidence in the market has also played a significant role.
Prime Minister Narendra Modi recently stated that both the BJP and the stock market will touch fresh record highs on June 4, when Lok Sabha election results are declared.
Union Home Minister Amit Shah and External Affairs Minister S Jaishankar have also stepped forward to address market concerns. Shah even urged investors to seize the opportunity and buy stocks ahead of the anticipated rebound after June 4. These reassurances from top leaders have positively influenced market sentiment.
Then there are foreign brokerages that are suggesting that the recent election-related investor concerns were unwarranted.
Bernstein, a global wealth management firm, for instance expects a short-term stock market rally either leading into elections or the week after results, if Prime Minister Narendra Modi is re-elected. That said, the brokerage sees profit booking thereafter, as the reality of execution and valuations emerge.
Two other multinational banks, Nomura and HSBC, are also bullish on Modi and India.
Japan-based Nomura has predicted an ‘Outright’ win for Modi’s BJP, which could send stocks flying on the D-Street
Alnalyst at HSBC went a step further, anticipating a 323-seat win for BJP compared to 303 in 2019, with the NDA coalition reaching 377 this time around versus 353 in the the 2019 general election.
Foreign Investors
While foreign brokerages are bullish on Modi and India, the same sentiment has not been reflected in the actions of big foreign investors. Foreign institutional investors have pulled out Rs 33,500 crore from the Indian markets since the start of May.
However, their incessant selling has been more than compensated by the continued buying from domestic institutional investors who have pumped in over Rs 44,000 crore in the Indian market, extending their buying spree to 10 straight months.
RBI’s Dividend of ₹2.11 Lakh Crore
Also improving the sentiment, is RBI’s surprise gift to the government. At a time when some of the central banks in the advanced world have reported losses and negative equity, the Reserve Bank of India has announced a bumper dividend of Rs 2.1 lakh crore to its sole owner, the government.
The mega dividend by India’s central bank will help the government to reduce its fiscal deficit and step up infrastructure spending.
Prime Minister Narendra Modi recently stated that both the BJP and the stock market will touch fresh record highs on June 4, when Lok Sabha election results are declared. Markets Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
