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Dalal Street bulls likely to get a booster dose from exit poll

The Sensex and Nifty are likely to open with gains of 1-2 per cent on Monday.

, ET Bureau|
May 20, 2019, 07.48 AM IST
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“In the coming days, markets may head towards lifetime highs if global markets are supportive.”
Stocks are set to surge at the open today, getting a shot in the arm from exit polls predicting a clear win for the Bharatiya Janata Party-led coalition in national elections, investors and analysts said. The Sensex and Nifty are likely to open with gains of 1-2 per cent on Monday but the momentum will depend on foreign portfolio inflows and the actual election outcome after votes are counted on May 23, they said.

Most exit polls released on Sunday evening after the close of the seventh phase of voting predicted that the National Democratic Alliance (NDA) could win anywhere between 242 and 352 seats, well above expectations and past the 272-mark needed to form a government.

“The market is likely to open with a gap up of 1.5-2 per cent. We will need to closely watch for FPI (foreign portfolio investor) flows data but markets are likely to stay buoyant till the verdict,” said Gautam Shroff, co-head, institutional equities at Edelweiss.

Indian benchmark indices ended as the best-performing market in the Asian region in the week before the exit polls, largely due to a spurt in the last two sessions. The Sensex and Nifty gained over 1 per cent in the week ended May 17, closing at 37,930.77 and 11,407.15 points, respectively. “The market will open with a gap up of 1-2 per cent as exit poll predictions are better than what the market expected. Markets will then wait till actual outcome,” said Piyush Garg, chief investment officer at ICICI Securities.

“In the coming days, markets may head towards lifetime highs if global markets are supportive.”
Domestic institutional investors (DIIs) have fuelled the markets in the past two sessions, buying local shares worth Rs 1,800 crore on Friday, according to provisional data. FPIs, as per their recent selling trends, offloaded shares worth Rs 1,058 crore on Friday.

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Experts said they will watch out for foreign flows turning positive as this would determine whether the rally in the market is sustained.

“If foreign investors start buying, then (the Nifty) may even touch 12,000 going forward,” said Shroff of Edelweiss. “But if foreign flows do not turn positive, the market rally will fizzle out around 11,800. Outflow because of the MSCI rebalancing is to be kept in mind but that will happen at the month end.”

Exit polls showing that the BJP will return to power will boost market sentiment, said Gaurav Dua, head of strategy and investments at Sharekhan. “If the global environment also turns supportive, the Nifty could break past the 12,000 level to a new high.”

Foreign investors have adopted the ‘sell in May and go away’ strategy so far this month. The last fortnight has been fraught with volatility as US-China trade tensions have dominated headlines. The surge in crude oil prices, a pain point for commodity importing India, has also raised worries on the fiscal front. The betting market had also trimmed its forecast on the number of seats the BJPled coalition would win amid fears that the rural slowdown could impact its prospects, souring market sentiment.

The Nifty logged its worst losing streak in eight years while for the Sensex it was the most since February when both fell for nine straight sessions between April 30 and May 10.

FPIs have pulled out Rs 4,900 crore from Indian equities so far in May while DIIs are net buyers to the tune of Rs 8,800 crore. However, indices are still down nearly 3 per cent for the month, which is in contrast with the previous two months when they gained close to 9 per cent and scaled all-time highs due to the strong perception that the NDA would return to power, following the government's tough stance against Pakistan in the aftermath of the Pulwama terror attack. FPIs bought shares worth a net Rs 53,400 crore during this period, accounting for a bulk of overseas investor flows this year.
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