Stocks cheer BJP’s assembly election wins, climb fresh peaks

The Bharatiya Janata Party’s (BJP’s) victory in three out of four state assembly elections fired up stocks as benchmark indices Sensex and Nifty raced to all-time closing highs on Monday.

Energy and financial services stocks drove the rally, with the Nifty Energy index rising 2.61% and the Nifty financial services index jumping 3.23%. Both the indices have about 46.5% weightage in Nifty 50 index.

The NSE Nifty 50 index surged by 2.07% on Monday to 20,686.80, marking a new record high for the second consecutive session. The S&P BSE Sensex jumped 2.05% to a record closing at 68,865.12.

Among individual stocks on the Nifty index, Eicher Motors surged the most at 7.45% on strong sales in November, stock market data showed.Adani group stocks Adani Ports and Adani Enterprises jumped 6.15% and 6.78%, respectively.

Larsen and Toubro’s stock surged nearly 4% following recommendations from analysts who favored the company on government emphasis on infrastructure and welfare expenditure.

Shares of Reliance Industries, ICICI Bank, HDFC Bank–the other key components in the benchmark indices gained between 1% and 5%.

The Nifty had hit a record high on Friday, on the back of strong quarterly growth and monthly factory activity data.

Meanwhile, gold prices climbed to an all-time high and Bitcoin crossed $41,000 for the first time since May 2022, driven by investor speculation that the US Federal Reserve will reduce interest rates early next year. Meanwhile, US equity futures indicated a downward trend, and European futures showed mixed signals.

On Friday, Powell had said that the Federal Open Market Committee plans to keep its policy restrictive until policymakers are convinced that inflation is heading solidly back to 2%.

“It would be premature to conclude with confidence that we have achieved sufficiently restrictive stance or to speculate on when the policy might east,” Powell said. Gold and oil gained, while US stocks and bonds rallied on Friday following Powell’s commentary as markets speculated around US rate cuts in March.

“Global markets are currently in a fabulous mood. The US 10-year bond yield and the dollar index are also cooling off, strengthening the market. These factors will be closely monitored as they have the potential to influence market sentiment,” Pravesh Gour, senior technical analyst at Swastika Investment Ltd, said.

The BJP’s victory in the three Hindi heartland states puts it in the pole position ahead of the general election next year. The recent election results, seen as a precursor to the 2024 elections, have affirmed Prime Minister Narendra Modi’s enduring popularity, political analysts Amitabh Tiwari wrote in Press Insider.

Last month, Christopher Wood, the global head of equity strategy at Jefferies LLC, had warned that the equity markets in India would fall by 25% next year if Modi’s party fails to retain power in next year’s general election.

On the macroeconomic front, the services sector’s Purchasing Managers’ Index (PMI) data will be released on Tuesday, while the Reserve Bank of India’s decision on interest rates is scheduled for Friday.