India shares hit lifetime highs

Indian shares hit lifetime highs while the rupee gained and bond yields dropped with investor sentiment buoyed by expectations of sustained economic growth after exit polls indicated a decisive mandate and a third term for Prime Minister Narendra Modi.

Weekend exit polls projected the alliance led by Modi’s Bharatiya Janata Party (BJP) to increase its 303 seats in the 543-member lower house and likely get a two-thirds majority - enough to initiate amendments to the constitution.

The broader Nifty index ended up 3.25% at 23,263.90 points after touching a record high of 23,338.70 in opening deals. The BSE index closed up 3.39% at 76,468.78 points, just off its lifetime peak of 76,738.89 hit earlier.

The Nifty and BSE index have both nearly doubled in value since their close a day before election results in 2019.

“As we await the official election results, significant volatility is expected. The index has now established a base in the 22,600-22,800 range, and a decisive close above 23,400 could drive it towards the 24,000 mark,” said Ajit Mishra, senior vice president, research, at Religare Broking.

The benchmark 10-year government bond yield touched 6.9421%, its lowest since April 8, 2022, falling 4 basis points from its previous close.

The rupee ended at 83.1425 against the dollar, rising nearly 0.4% on day, to mark its best single-day gain in more than five months.

A win for the BJP had been widely expected but, if confirmed in the official results, the margin will be larger than analyst forecasts and will be seen as a positive for equity markets that have scaled record highs on the back of economic growth.

India’s exit polls have a patchy record, often getting the outcome wrong. The results of the general election where 642 million people voted are to be announced on Tuesday.

“People will continue to clamour for a correction, but I believe every dip will be bought into. The month of June could be a defining one for the bulls, so one should make the most of this opportunity and stay a bit greedy,” Vikram Kasat, Head - Advisory at brokerage Prabhudas Lilladher said.

“Last month, I kept saying ‘buy the dip’; this month’s slogan is going to be ‘ride the wave’,” he added.

Foreigners, who poured a net $20.7 billion into Indian equities last year but had pulled back ahead of the election, may also see the vote’s conclusion as an excuse to buy.

Analysts at Kotak Institutional Securities find very little value in the market and assess that most sectors and stocks are overvalued, “with the extent of overvaluation increasing in the inverse order of market capitalization, quality and risk”.

“A large BJP victory may sustain rich-to-bubble multiples in parts of the market (automobiles, capital goods, public-sector units) for longer, but we would be surprised if many of the lofty embedded expectations come to fruition,” they wrote.

Reuters