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Sensex surges ahead of exit polls outcome; key factors that fuelled the rally

Analysts have warned investors to take exit polls results with a pinch of salt.|
Updated: May 17, 2019, 06.05 PM IST
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From the Sensex pack, Bajaj Finance, Hero MotoCorp, HUL stood as the top gainers.
NEW DELHI: Notwithstanding weakness in the global markets and rising crude oil prices, the domestic equities extended gains for a second session on Friday with Sensex and Nifty rising 1.5 per cent each ahead of exit poll results on Sunday.

The last phase of the seven-stage Lok Sabha elections will wrap up this weekend with exit polls starting to come out on Sunday evening.

Heavy buying was seen in private bank, financial, auto and realty stocks, while there was mild selling in IT and metal stocks. NSE pharma index plunged 1.50 per cent with Aurobindo falling 7 per cent.

Overall, BSE Sensex rallied 537 points or 1.44 per cent to close at 37,931 while NSE barometer Nifty ended the day at 11,407, up 150 points or 1.33 per cent.

Volatility index India VIX eased 0.89 per cent to the 28.12 level.

Here are the top factors that boosted Dalal Street on Friday:

Election-related trades
Traders might have taken election-related bets ahead of the seventh-phase polling. Indian voters are eagerly awaiting exit polls.

According to Milan Vaishnav, Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, traders were expected to adjust their positions on Friday prior to general election results.

Analysts though warned investors to take exit polls results with a pinch of salt.

“Exit polls have not been accurate for the last three national elections. In 2004, exit polls wrongly forecasted BJP-led NDA coalition winning again, while in 2009, they meaningfully underestimated Congress-led UPA's seat share. In 2014, while exit polls correctly predicted a BJP-led NDA victory, they significantly underestimated the margin of victory,” UBS said.

Private lenders, FMCG stocks lift indices
A major part of Friday’s rally was led by banking and financials and FMCG stocks. Data suggests the HDFC twins alone contributed 140 points to Sensex’s rise. ICICI Bank, Kotak Mahindra Bank and Bajaj Finance contributed another 120 points. FMCG stocks ITC and Hindustan Unilever also contributed 85 points to the index gains. Overall, 21 of out of 30 Sensex stocks were ruling higher.

Technical factor
During the session, NSE Nifty broke out from an inverted Head & Shoulders pattern, whose neckline was placed at the 11,260 level. A sustained trade beyond this resistance line was expected to take the index towards of 11,300-11,370 range.

The index on Thursday made Harami pattern on the daily chart. Some experts were of the view that breaching the 11,300 level would trigger a rally.

“Nifty formed a Harami pattern and a narrow-range three bar formation on the daily scale, indicating that a small follow up could lead to a short-term bottom process ahead of the election outcome,” Chandan Taparia of Motilal Oswal Securities said on Thursday.

Quarterly numbers shine
Four Nifty companies posted their March quarter numbers today. Out of them, three posted stellar gains, thus infusing a sense of optimism in Indian equities. While Bajaj Auto posted a 21 per cent rise in profits, DRL's net jumped some 44 per cent. Bajaj Auto stock even spiked following the results and was among the best performers in the Sensex pack.

Markets at a glance
As may as 23 out of 30 Sensex stocks ended in the green with Bajaj Finance as the lead gainer, up 5.89 per cent. The NBFC firm extended gains following strong March quarter results. Hero MotoCorp, Maruti Suzuki, Bajaj Auto, Kotak Mahindra Bank and HDFC were among the other top gainers.

YES Bank, on the other hand, was the worst index performer, extending its decline to a third straight session. HCL Technologies, Vedanta, Infosys, TCS and Sun Pharma were among other Sensex stocks that fared poorly.

BSE Midcap index rose in line with benchmark Sensex, climbing 1.08 per cent, while the smallcap index managed a 0.51 per cent gain.

Sectorally, IT, teck, healthcare and metals showed some weakness, barring which, all other sectors ended in the green. Auto, bankex, finance and FMCG logged the maximum gains among sectoral indices. rising over 2 per cent each.

Expert View
Despite global volatility, domestic market extended gains on continued accumulation in blue chips by domestic investors and short covering ahead of exit polls on Sunday. Auto and FMCG outperformed in expectation of ease in interest rate from the RBI and prospects of near-normal monsoon. Having said that, investors remained focused on final election results for the short-term direction
- Vinod Nair, Head of Research, Geojit Financial Services

Market has shown tremendous strength one day before the long-awaited exit polls, despite the ongoing ambiguity in the US-China trade talks. With the last phase of elections scheduled for Sunday, the all-round buying across the sectors reflects market's anticipation that exit polls may indicate formation of a stable government
- Jagannadham Thunuguntla, Senior VP, Centrum Broking

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