Sensex crosses 14k Markets cheer poll results SENSEX: Sentimental Move…
Political stability combined with hopes of an economic revival have cheered the investors as the Indian markets started the week’s proceedings on a thumping note. The markets have been halted as they have hit the upper circuit and will open at 10.55 am. The overall advance to decline ratio is poised at 68 to 1 on the BSE. While the US market ended lower, the European markets closed mixed last Friday. The Asian indices are currently trading in the red.
The BSE Sensex and the NSE Nifty are trading firm, up by around 1300 points and 530 points respectively. The BSE Midcap is up 7%, while the Smallcap index is up 5%. The rupee is trading at 48.35 to the dollar.
The election outcome has given a boost to the capital goods and infrastructure stocks. Hopes of a pickup in government spending have brought cheer to these sectors.
In an unprecedented development, trading in the Indian stock markets had to be halted within minutes of opening because they hit the index based market wide circuit filter limit. As per the rule, if there is a 20% movement in either of the two benchmarks, trading has to be halted for the remainder of the day. Thus, with the Nifty surging more than 700 points, it breached the 20% limit, forcing the authorities to suspend trading for the day. While the benchmark Sensex ended the day up a whopping 2,099 points (17.2%), Nifty closed the day with gains of 636 points (up 17.3%). The BSE Mid Cap and Small Cap indices surged 12% and 9% respectively. While all the sector stocks had a field day, gains in banking and realty really stood out.
Most of the Asian markets are also trading in the green currently. Rupee was trading at 47.99 against the US dollar at the time of writing.
With the Indian populace giving a clear mandate to the Congress led UPA and its alliance partners, it was being anticipated that the stock markets would receive a big boost. But what transpired today must have left even the most bullish of investors gasping for breath. For the first time ever in the Indian stock market history, trading had to be suspended for the day as the benchmark Nifty breached the 20% circuit filter. And the rally was not just restricted to a few stocks. There wasn’t a single stock on the Sensex that ended the day in the negative, with more than a third of the stocks bagging gains of more than 20% and 75% of the remaining notching up gains between 10% and 20%. With the government widely expected to pull out the 'reform' genie out of the bottle, stocks from sectors like Infra, banking and real estate where reforms are badly needed, really hit through the roof.
In times such as these, where there is a tendency to get carried away and a temptation to go with the flow, it always makes sense to step back and have a reality check. While we do want to sound like party poopers, the fact remains that the changes that investors and corporate are yearning for will not happen overnight. Although the re-election of the UPA government with Dr. Manmohan Singh at the helm and most importantly, without the baggage of the Left parties does set the ball rolling in the right direction, the investors are advised to go overboard at their own peril. Furthermore, the problems that India Inc is facing like demand slowdown, leveraged balance sheets and a poor exports scenario to name a few, do not get washed away with the election results. Hence, we urge investors to do a thorough bottom up analysis and invest only in those stocks which boast of strong fundamentals from a long-term perspective. Last but not the least, keep a close eye on valuations for even the best stock will not do you any good if bought at expensive valuations.