The rally had started on Tuesday after exit polls the previous evening indicated strong gains for the BJP and the upswing gathered momentum on Wednesday. In the last three sessions, the sensex has added a little over 2,600 points, or nearly 5%, since closing at a seven-month low of 52,843 on Monday, mainly because of uncertainties relating to the Russia-Ukraine war.
At close of Thursday’s session, the sensex was up 817 points, or 1.5%, at 55,464. The Nifty on the NSE was up 250 points, also 1.5%, at 16,595. The rupee too gained by 26 paise to end at 76.31 to the dollar.
According to Aishvarya Dadheech, fund manager at Ambit Asset Management, in addition to geopolitical factors that impacted the sensex in mid-session, the strong performance by the BJP in the state elections provided a much-needed support to the market. “State elections’ outcome took away the political instability risk in India for at least two years,” Dadheech wrote in a note.
In Thursday’s session, Reliance Industries, HDFC Bank and Hindustan Unilever accounted for most of the day’s gains. On the other hand, technology stocks witnessed some selling pressure, BSE data showed. The day’s gains, however, came despite foreign fund selling. End-of-the-session data on the BSE showed that foreign portfolio investors (FPIs) were net sellers at Rs 1,981 crore. Domestic funds, on the other hand, were net buyers at Rs 946 crore.
Brokers believe the state poll results are unlikely to impact the market’s direction in any major way. Investors’ focus will now shift towards “how policymakers minimise the economic cost of the geopolitical quagmire”, a report by Emkay Global noted. According to Dadheech, investors still need to be vigilant because the uncertainty of the geopolitical standoff looms large. “Commodity prices are least likely to see a secular downturn even after war subsides because sanctions will continue to disrupt the global supply chain. Unless sanctions are withdrawn, the global markets can remain volatile in the coming months and India will not remain insulated.”
Friday’s market is also expected to be impacted by the US market that showed a weak trend early in Thursday’s session, mainly because retail inflation for February in the world’s largest economy was at 7.9% — the highest reading in over 40 years. While prices of crude oil and gold cooled to some extent, the 10-year US government bond yields again shot above the psychologically important 2% mark.