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Election Euphoria Continues

Monday, May 12, 2014
By Dominic Rebello

Exit polls could trigger another sharp up move. But, Friday will be the big day...

Last Friday the Sensex rose by 2.91% to close at 22994, while marking the day's high at 23048 points level. The Nifty also rose by  2.99% to close at the 6858, before registering an all time high of 6871 points level. With these figures, the indices have registered their all time closing highs.

Market experts are of the view that a select few influential traders from the market had some knowledge of the nature of results expected from exit polls. The exit polls will start projecting figures by different agencies by today evening. After consolidation over the last two weeks, Foreign Institutional Investors (FII), expecting an NDA win, took long positions in huge quantities. Most market participants were caught unawares as the indices kept rising throughout the session to mark their respective highs. Many brokers and small traders were expecting the same to take place on the first day of the week, when the exit polls results were expected to be delivered.

“It was an exceptional day for the benchmarks as they were seen surging almost vertically last Friday and formed new record highs. Renewed buying in index heavyweights kept the momentum intact till the end; Banking, Realty, Power and Capital goods counters attracted maximum interest from participants.
The sentiments were buoyant since the beginning on the back of continuous inflow of foreign funds and expectations of a stable government after this general election. We were in profit taking phase for last two weeks and Friday’s abrupt rise ended the same. Now, all indications are in the favor of this northward rise to continue ahead as well. However, one should remain focused and keep the long positions hedged as elections are set to conclude today and exit polls may bring in some surprises,” said Jayant Manglik, President-retail distribution, Religare Securities.

While many technical analysts had predicted resistance levels on the Nifty and Sensex, the uptrend paid heed to none as the election euphoria gained momentum and the expectation of a business friendly, stable government at the centre, helped the indices to cross over major resistance levels in a single stroke. “The Nifty on Friday broke two major resistance levels of 6740 and thereafter 6820, on the way to touching a new high of 6871. Last Friday’s move was led by Large Caps, while the Mid-cap and Small cap indices were clearly lagging. While there were absolutely no global or economic reasons to attribute the move to, the trigger was clearly the expectations of a better than expected outcome for the NDA in the Exit Polls. The rally was led by banks, cyclicals and rate sensitives. The Bank Nifty gained 5.19%, the BSE Cap Goods gained 3.24%, while the CNX Realty Index gained 4.60%,” said Arun Gopalan, Vice President-Research & Investments, Systematix Shares

While market participants and people across the globe eagerly wait for 16 May, the day the results will be declared by the Election Commission, the exit poll reports will continue to have an impact on the market, apart from the global cues and IIP and inflation data that is expected to be released this week.

“Unmistakably, the focus remains on the approaching D-day i.e. 16th May when the election verdict would be announced. But even before that, the market would react to exit polls numbers as it starts trickling in once the final phase of polling gets completed by 12th May. Sector-wise, the market behavior was in line with pattern of past few weeks – cyclicals gained at the expense of defensive’s. Going into the next week, we would have the IIP and Inflation data to be announced. On the global front, stimulus measures by EU if any could be a positive. However, focus will be firmly on the exit poll numbers due today evening as well as on the final election results on Friday. A decisive verdict from the elections will be a long term positive for the markets,” said Sanjeev Zarbade, Vice President- Private Client Group Research, Kotak Securities.

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