Stocks zoom as state elections clear mandate

“Markets hate uncertainty, and the outcome of these state elections will provide policy continuity and stability,” said Devarsh Vakil, deputy head of retail research, HDFC Securities. The central government will now be encouraged to confidently pursue its agenda and look for opportunities. He called for further economic reforms.

The benchmark Nifty and Sensex indices rose 1.53% and 1.5%, respectively.

Besides favorable global cues, sharp fall in crude oil and other commodities during the previous trading session also boosted investor sentiments.

Aishwarya Dadhich, a fund manager at Ambit Asset Management, said, “Markets saw a sharp recovery after a sharp fall in commodity prices following signs of mid-term talks by Ukraine. Back home, the incumbent party’s strong performance in the state elections also provided much needed support to the market.”

Dadhich said the results of the state elections removed the risk of political instability in India for at least two years.

Although the indices closed in the green, there was volatility in intraday trading. Vinod Nair, Head of Research, Geojit Financial Services, said weak western markets and rise in crude oil prices added to the volatility ahead of the release of key European and US economic data.

“In the past, a clear political mandate has created excitement in the markets, although this is unlikely to be the case this time around,” the lawyer said. According to the lawyer, macroeconomic factors are not conducive to the markets, with higher crude oil prices likely to increase inflation. Investors are cautious as central bankers are opening up their lax monetary policies, which they say will keep markets in check at higher levels.

Dadhich said investors need to be cautious as the uncertainty of the geopolitical standoff is huge. There is little chance of a secular slowdown in commodity prices even after the Russia-Ukraine conflict subsides as sanctions will continue to disrupt global supply chains, he said. He said that unless sanctions are lifted, global markets may remain volatile and India will not remain untouched.

The volatility in the commodity sector continued on Thursday as well. Brent crude prices, which fell over 11% to $118.51 a barrel during the previous trading session, were trading at $122.90 a barrel on Thursday.

Lower oil prices are necessary to support the rupee. “The rupee is not out of the woods as oil prices on Brent are well supported above $100,” said Anindya Banerjee, vice president of currency derivatives and interest rate derivatives at Kotak Securities Ltd. Banerjee expects a boundary game in the near term 76 more 77 per dollar on the spot.

Risk-off sentiment prevailed, and foreign portfolio investors remained sellers. FPIs who have sold more than Till March 9, shares worth Rs 1.11 lakh crore remained on sell-off mode on Thursday as well. At the same time, domestic institutional investors bought 9,170 crore shares on Thursday.