Benchmark stock market indices, Sensex and Nifty50, surged to record highs on Monday following exit polls forecasting a historic third term for Prime Minister Narendra Modi.
The S&P BSE Sensex soared over 2,000 points, reaching a new peak of 76,738.89, while the NSE Nifty 50 climbed to 23,338.70. Both indices achieved unprecedented levels.
By 10:10 am, the Sensex had gained 2081.29 points, standing at 76,042.60, and the Nifty 50 was up 646.90 points at 23,177.60.
Nifty 50 and Sensex Reach Record Highs
The Indian stock market benchmarks, Nifty 50 and Sensex, hit record highs on Monday, June 3. This surge followed exit polls on Saturday, June 1, predicting the BJP-led NDA would win over 350 out of 543 seats in the 2024 Lok Sabha elections.
The market shook off election jitters with these positive predictions, driving the Sensex up 2,622 points to open at 76,583.29. It further climbed 2,778 points, or 3.8%, reaching a new high of 76,738.89.
Similarly, the Nifty 50 opened 807 points higher at 23,337.90 and rose 808 points, or 3.6%, to a new peak of 23,338.70.
Investors went on a buying spree across all sectors, pushing midcap and smallcap indices to new heights. The BSE Midcap index jumped 4% to 44,560.97, while the BSE Smallcap index climbed 3.6% to 48,973.96.
Around 200 stocks, including major names like SBI, ICICI Bank, Axis Bank, Bharti Airtel, Larsen & Toubro, Mahindra & Mahindra, NTPC, and Power Grid, reached fresh 52-week highs during intraday trade.
Despite May’s volatility due to election uncertainty, which saw the India VIX surge by 91%, the exit poll results boosted market confidence. Experts also noted three other factors that likely supported this positive sentiment.
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Four Key Factors Driving the Market to Record Highs
Let’s explore the four key factors that drove the market to record highs:
Exit Poll Results
Exit polls released on June 1 suggested a historic third term for Prime Minister Narendra Modi and the National Democratic Alliance (NDA). Most polls predict the NDA, led by the Bharatiya Janata Party (BJP), will secure over 350 seats, with some, like India Today-My Axis India, India TV-CNX, and News24-Todays Chanakya, forecasting over 400 seats.
The Opposition INDIA bloc is expected to win fewer than 200 seats. With the Lok Sabha elections over, analysts expect the market to remain positive unless unexpected negative events occur.
“We expect Indian equities to rise over the next 3-4 days, with the Nifty hitting a new all-time high this week, possibly reaching 23,200-23,300 levels. We also foresee the India 10-year yield at 6.9% and the Indian rupee appreciating to 82.75,” said Amit Goel, Co-Founder & Chief Global Strategist at Pace 360.
Macro Boost
The National Statistical Office (NSO) reported on May 31 that India’s GDP grew by 7.8% in the January-March quarter of fiscal 2023-24 (Q4FY24) and 8.2% for the entire year, surpassing estimates. The fiscal deficit for 2023-24 was 5.63% of GDP, better than the 5.8% estimated in the Union Budget.
“The better-than-expected 8.2% GDP growth will support the market. S&P’s upgraded outlook on India’s rating is also a positive development,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
S&P Global recently raised its outlook on India to positive and stable, citing strong macroeconomic fundamentals and government capital expenditure, although it kept its credit ratings at ‘BBB-/A-3’.
Across-the-Board Buying
Broad buying across sectors such as banking, financial, metal, realty, and oil and gas fueled the market’s rise. The Nifty 50 index surged over 4% to a record high of 50,990, while the Nifty PSU Bank index jumped nearly 7% in morning trade. Realty, Metal, and Financial Services indices also saw gains of up to 4%.
Positive Global Cues
Global sentiment also boosted the domestic market. Despite persistent inflation, there is growing anticipation of rate cuts in Europe and potentially by the US Federal Reserve in the latter half of the year. Positive economic data from major Asian economies further supported this trend.
For instance, Japan’s factory activity expanded in May for the first time in a year, and South Korea’s factory activity grew at its fastest pace in two years, according to Reuters.
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Nifty 50 and Sensex Reach Record Highs FAQs
Q.1. What caused the Sensex and Nifty 50 to reach record highs?
Ans. Sensex and Nifty 50 surge was driven by positive exit polls predicting a BJP-led NDA win, strong GDP growth, broad sector buying, and favorable global economic conditions.
Q.2. How did the exit polls influence the stock market?
Ans. Exit polls forecasting a historic third term for Prime Minister Narendra Modi boosted investor confidence, leading to a significant rise in the stock market.
Q.3. What other factors contributed to the market’s rise?
Ans. Alongside the exit polls, strong GDP growth figures, across-the-board buying in various sectors, and positive global economic cues contributed to the market’s upward trend.
Q.4. Which sectors saw significant gains in the stock market?
Ans. Sectors such as banking, financial services, metals, realty, and oil and gas experienced notable gains, with indices like Nifty Bank and Nifty PSU Bank hitting new highs.
Q.5. What are the market predictions following the election results?
Ans. Analysts expect Indian equities to continue rising, with the Nifty potentially reaching new all-time highs and the Indian rupee appreciating against the US dollar.
