Exit Poll outcome drives markets to close at fresh highs on Monday

Indian equity markets skyrocketed remarkably on Monday, banking on exit poll predictions of continuity and political stability. The exit polls predicted a historic third term for Prime Minister Narendra Modi. The start of the day was on strong note, as positive global cues on the back of encouraging inflation data from the U.S., robust Indian GDP data for the fourth quarter of FY24 and foreign fund inflows boosted investor sentiment. Foreign institutional investors (FIIs) bought shares worth Rs 1,613.24 crore on May 31, while India's Q4 GDP grew 7.8 per cent, beating estimates.

Bulls held a tight grip over the Dalal Street during the whole day, as the government data showed that India’s goods and services tax (GST) collection in May rose 10 per cent year-on-year (Y-o-Y) to Rs 1.73 trillion, taking overall collection to Rs 3.83 trillion so far in the current financial year (FY25). Besides, the growth of eight core industries rose to 6.2% in April from 6% in March, mainly due to higher growth achieved in natural gas, refinery products, coal, steel and electricity sectors. Sentiments remained optimistic as Prime Minister Narendra Modi said that the Q4 GDP growth data for 2023-24 shows robust momentum in Indian economy which is poised to further accelerate.

Adding more relief among traders, India’s fiscal deficit - the gap between expenditure and revenue - came in at 5.6% of the Gross Domestic Product (GDP) in FY 2023-24 (FY24), lower than the revised estimate (RE) of 5.8%, amid higher revenue realisation and lower expenditure. Traders overlooked reports that India's manufacturing sector growth eased further in the month of May, signaling a slower but still substantial improvement in the health of the sector. The headline figure was nearly four points higher than its long-run average. According to the survey report, the seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) eased to 57.5 in May as against 58.8 in April. It was 59.1 in March.

On the global front, European markets were trading higher, amid bets that the European Central Bank (ECB) will deliver its first interest-rate cut of the cycle on Thursday. Also, helping underpin investor sentiment, Eurozone manufacturing PMI was finalized at 47.3 in May, up from April's 45.7 and reaching a 14-month high. Asian markets settled mostly higher on Monday, as the manufacturing sector in China continued to expand in May, and at a faster pace, with a manufacturing PMI score of 51.7. That's up from 51.4 in April, and it moves further above the boom-or-bust line of 50 that separates expansion from contraction. Manufacturing production rose at the fastest pace since June 2022, with firms in the consumer segment reporting especially sharp output growth in May.

Finally, the BSE Sensex zoomed 2507.47 points or 3.39% to 76,468.78, and the CNX Nifty was up by 733.20 points or 3.25% points to 23,263.90.   

The BSE Sensex touched high and low of 76,738.89 and 75,678.43 respectively. There were 25 stocks advancing against 5 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index jumped 3.54%, while Small cap index was up by 2.05%.

The top gaining sectoral indices on the BSE were Utilities up by 7.78%, PSU up by 7.67%, Power up by 7.60%, Oil & Gas up by 7.42% and Energy up by 6.28%, while there were no losing sectoral indices on the BSE. 

The top gainers on the Sensex were NTPC up by 9.21%, SBI up by 9.12%, Power Grid up by 8.97%, Larsen & Toubro up by 6.27% and Axis Bank up by 5.68%. On the flip side, HCL Tech. down by 0.62%, Sun Pharma down by 0.47%, Asian Paints down by 0.41%, Nestle down by 0.04% and Infosys down by 0.02% were the top losers.

Meanwhile, taking into account strong economic expansion along with post-election policy continuity, Moody’s Ratings has projected India to grow 6.8 per cent in the current year (2024), followed by 6.5 per cent in 2025. India’s real GDP grew 7.7 per cent in 2023, up from 6.5 per cent in 2022, driven by robust capital spending by the government and strong manufacturing activity.

Moody’s in its update to Global Macro Outlook 2024-25 said ‘We believe the Indian economy should comfortably register 6-7 per cent annual real GDP growth and we forecast around 6.8 per cent growth’. It said strong, broad-based growth will likely be sustained with post-election policy continuity. It said this year’s interim Budget targets capital expenditure allocation of Rs 11.1 lakh crore, or 3.4 per cent of GDP in 2024-25, 16.9 per cent above the 2023-24 estimates. It also said ‘We expect policy continuity after the general election and continued focus on infrastructure development’. 

It added private industrial capital spending is also set to pick up with ongoing supply chain diversification and the government’s production linked incentive (PLI) scheme to boost targeted manufacturing industries. Companies have invested around Rs 1.07 trillion through December 2023 across the 14 sectors covered under the PLI scheme, with exports surpassing Rs 3.40 trillion since the scheme’s implementation, as per government data. It further said ‘Healthy corporate and bank balance sheets, rising capacity utilisation and upbeat business sentiment also point to an improving private investment outlook’. It noted ‘Given the solid growth dynamics and inflation above the 4 per cent target, we do not expect policy easing any time soon’.

The CNX Nifty traded in a range of 23,062.30 and 23,338.70. There were 42 stocks advancing against 8 stocks declining on the index.

The top gainers on Nifty were Adani Ports & SEZ up by 10.20%, NTPC up by 9.14%, SBI up by 9.07%, Power Grid up by 8.92% and ONGC up by 7.47%. On the flip side, Eicher Motors down by 1.32%, LTIMindtree down by 1.12%, HCL Tech. down by 0.73%, Asian Paints down by 0.51% and Sun Pharma down by 0.46% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 11.39 points or 0.14% to 8,286.77, France’s CAC rose 31.54 points or 0.39% to 8,024.41 and Germany’s DAX gained 142.17 points or 0.77% to 18,640.11.

Asian markets settled mostly higher on Monday as soft US inflation data kept the door open for the US Federal Reserve to cut interest rates later in the year. Hong Kong and South Korean shares gained, led by technology shares after Nvidia Corporation unveiled a new line of artificial intelligence chips. A survey showed South Korea's factory activity expanded in May at the fastest pace in two years. Japan shares rose after a survey revealed the health of Japan's manufacturing economy improved for the first time in a year during May. However, Chinese shares ended with marginal cut even as China's factory activity grew the fastest in about two years in May due to production gains and new orders.