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Sensex breaches record 23K-mark on positive exit poll sentiment

Hopes of strong verdict high; FIIs suspected to have advance access to survey results.

By: ENS Economic Bureau | New Delhi |
May 10, 2014 12:46:16 am

With exit poll results just round the corner, the BSE Sensex and the broader Nifty hit a record high on Friday, posting their biggest daily gains since September on renewed hopes of a BJP-led coalition going on to form a stable government at the Centre.

The benchmark 30-share Sensex at the BSE rose 704 points or 3.15 per cent during the day to breach the psychological 23,000 mark for the first time, finally closing the day at an all-time high of 22,994 points, a gain of 650 points or 2.9 per cent — the highest single day gain in eight months.

Led by strong net investment of Rs 1,268 crore by foreign institutional investors in Indian equities, the 50-share NSE Nifty too rose by 3 per cent to close the day at an all-time high of 6,858.8.

This is the highest gain since September 19, when the markets rallied by over 3.4 per cent after the US Federal Reserve announced that it will continue with its easy money policy, which offered much-needed comfort to the markets.

In Friday’s rally, sectors seen most likely to benefit from the NDA win led the gains. Infrastructure shares such as Ambuja Cement surged, while the NSE’s banking sub-index hit a record high, with blue-chip ICICI Bank ending up sharply higher.

The surge ahead of the Lok Sabha election results, and right before the exit poll results, is not an isolated event. Even in 2009, when the markets were looking forward to the election results in the aftermath of carnage that followed the global financial crisis, the possibility of the UPA coming back to power fuelled a 2.88 per cent surge in the Sensex in the three trading sessions before the exit poll results were made public. During the corresponding period ahead of the 2004, 1999 and 1998 general elections, though, the trend was bearish.

A couple of market experts, who did not want to be named, hinted at a possibility of some global investors having gained access to exit poll reports from survey agencies as polling in almost 500 constituencies have been wrapped up. Some experts feel that the move was expected before the results. “There was aggressive buying by FIIs during the day and this was to happen as short positions were built in the market and the short-covering had to happen,” said Deven Choksey MD, KR Choksey Shares and Securities.

The global markets did not see a rally on Friday. While the Shanghai Composite slipped by 0.2 per cent, the Hang Seng of Hong Kong and Nikkei of Japan rose marginally by 0.1 and 0.25 per cent, respectively during the day. All major European markets too were trading weak. “There is no new news flow during the day except for the enthusiasm in the market on expectations of NDA coming to power with a clear mandate,” said the head of a leading financial services company on condition of anonymity.

At BSE, the rally was led by bank stocks. The BSE Bankex rose by 5.3 per cent followed by the real estate index at 4.4 per cent and power index at4.1 per cent.

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