Shrugging off worries over the spectacular win of Aam Aadmi Party (AAP) in the Delhi elections, stock markets staged an unexpected recovery on Tuesday on the back of higher growth estimates and expectations from the Union Budget scheduled later this month.
The BSE Sensex, which rose over 400 points at one stage, gave up the gain partly to conclude at 28,355.62, up 128.23 points or 0.45 per cent on the day AAP trounced the BJP in the elections.
On Monday, analysts had attributed the 490-point plunge in the Sensex to exit polls predicting BJP’s defeat in Delhi elections. However, the market ignored the BJP’s defeat and instead focussed on the Budget and the growth estimates.
After resuming higher at 28,122.48, the Sensex rose to 28,633.72 on initial strong buying as India’s GDP growth is likely to accelerate to 7.4 per cent in 2014-15. However, the Sensex declined afterwards to 28,044.49 on late selling pressure and rising foreign capital outflows.
“Everybody thought the market will tank in the wake of the remarkable victory of AAP which is now expected to tighten the scrutiny of power companies. A section of the media even wrote a 5 per cent fall. But the market ignored all these speculations and chose to focus on reforms in the upcoming budget when finance minister Arun Jaitley is widely expected to boost capital spending and offer tax breaks to an under-performing manufacturing sector,” said BSE dealer Pawan Dharnidharka.
Further, advance growth estimates from the government showing strengthening economic recovery in the current year and the latest data showing a strong economic expansion in the third quarter helped key equity benchmark indices register decent gains in what was an extremely choppy trading session.
“The market has taken a break from the sharp fall seen in the last few sessions which was led by poor quarterly results, Europe issue and doubts about a rate cut in the near-term. All these issues continue… The focus is: what can we expect from the forthcoming budget,” said Vinod Nair, Head-Fundamental Research, Geojit BNP Paribas Financial.
The CNX Nifty at the NSE rose 39.20 points or 0.46 per cent to settle at 8,565.55, its highest closing level since February 6, 2015. However, RIL shares fell by 1.63 per cent to Rs 882.70 on the BSE.
On the recovery in the market after a fall in seven days, analysts said there was bargain buying at lower levels and short-covering by speculators who bought shares to cover their short positions. Budget expectations are expected to drive the market in the coming days, analysts said.