Markets fall, rise with BJP’s Gujarat tally

Indian stocks rallied on Monday on hopes that the ruling BJP will pursue its reforms agenda after winning assembly elections in Gujarat and Himachal Pradesh.

In a wild swing, the benchmark Sensex recovered nearly 1,200 points, after losing over 850 points in the morning when early trends showed the BJP was neckand-neck with the Congress party in Gujarat, the home state of Prime Minister Narendra Modi and BJP president Amit Shah.

The Sensex closed at 33,601.68, up 138.71 points, or 0.41%. The Nifty closed at 10,388.75, up 55.50 points, or 0.54%. Global markets were supportive with a few Asian indices gaining almost 1% on hopes the US will pass a bill that will reduce corporate and individual tax rates.

“With a positive outcome for the BJP in both Gujarat and Himachal, it appears that the bold measures such as demonetisation and goods and services tax (GST) have not significantly affected the sentiment adversely for the BJP. This would provide the central government the confidence to continue with its policy focus,” said Unmesh Kulkarni, a managing director at Julius Baer Wealth Advisors (India) Pvt. Ltd.

By close of trading, the BJP had a clear majority in both Himachal Pradesh and Gujarat.

“The result is also a big boost for foreign direct investment, which is sticky money. The markets trajectory is likely to be northwards now. We see the Nifty touching 11,500 in mediumterm,” said Ajay Bodke, chief executive and chief portfolio manager, Prabhudas Lilladher Pvt. Ltd.

“I feel nothing much changes on the ground level as far as economy is concerned,” said Ritesh Jain, chief investment officer, BNP Paribas Mutual Fund.

According to analysts, the markets will now shift focus back to fundamentals—the economy, corporate earnings and reforms. Indian benchmark indices have rallied 26-27% this year and investors are increasingly worried about expensive valuations.