Following a brief period of uncertainty over the outcome, sentiment turned positive again on Thursday after pre-poll surveys showed that the BJP, which has held power in the state for 22 years, is likely to win the election. With the optimism continuing on Friday, benchmark indices are now just about 2 per cent away from their all-time high levels.
The 30-stock Sensex surged 301 points, or 0.9 per cent, to close at 33250.30, taking the week’s gains to 1.3 per cent. The 50-share Nifty ended up about 99 points, or 1 per cent, at 10265.65. The Nifty closed the week with 1.4 per cent gain. Nifty and Sensex have outperformed most Asian markets for the week.
Volatility dipped further with India VIX ending 4.2 per cent lower at 13.67. Index major ITC was the top gainer on the Sensex, ending up 3.4 per cent at Rs 261.70, followed by Tata Motors, Sun Pharmaceutical and Hindustan Unilever, which gained about 2 per cent each.
Foreign portfolio investors (FPIs) utilised the rise in the market to offload shares worth Rs 675.2 crore, while Domestic Institutional Investors bought shares worth Rs 1,243 crore, provisional data showed. FPIs have been net sellers in six out of the last seven trading sessions, during which they have sold shares worth almost Rs 5,400 crore.
Money managers believe that the focus will continue to be on the Gujarat polls in the days to come and is likely to keep the market on edge.
“Volatility is likely to go up before the result,” said Piyush Garg, chief investment officer at ICICI Securities.
“If the result is in favour of the BJP, then the market re-testing lifetime highs is a reasonably good probability. If they win less than 100 seats or closer to 90 seats, then a 4-5 per cent downward swing is possible,” said Garg.
The Sensex had touched an alltime high of 33865.95 on November 7 and Nifty had hit a record high of 10490.45 on November 6.
Besides being a state where BJP has ruled for over two decades, Gujarat is also the home state of Prime Minister Narendra Modi. The Gujarat election will take place in two phases on December 9 and December 14. Counting of votes will take place on December 18.
Sanjiv Bhasin, executive vice president-market and corporate affairs at IIFL, said the pullback in the market is unlikely to last and volatility could inch up again ahead of the Gujarat election result.
“If they (BJP) don’t win a clear majority of over 125 seats, then the market will be disappointed and there could be a fall. If 10000 is broken, we may even see 9700 on the Nifty. However, due to liquidity conditions, the fall will be used as a buying opportunity,” said Bhasin.