Sensex Hits Record High Above 24,000 as Exit Polls See Modi Victory

The BSE Sensex surged over the psychological 24,000 for the first time on Tuesday as markets reacted positively to exit polls, most of which predicted a clear majority for Narendra Modi-led National Democratic Alliance in elections concluded on Monday.

The Sensex settled at 23,871, after earlier rising to a record high of 24,068.94, while the Nifty ended at 7,108.75, rising 94.50 points. The 50-share Nifty hit a new all-time high of 7,172 on Tuesday.

Despite the sharp rally, the Sensex ended nearly 200 points off the day's high and Tuesday's gain is the smallest over the last three sessions.

"You may see one small move on sentiment just on Friday, but the euphoria of a stable government is in the price... From Monday onwards, Indian markets would take cue from global markets, and issues like monsoon, inflation and budget, Anil Manghnani of Modern Shares and Stock Brokers told NDTV.

The Sensex has now gained over 1,500 points in just three sessions since Friday. The Nifty is up around 450 points during the same period. (Track markets)

The BJP-led NDA is projected to win between 249 and 340 seats, according to six exit polls. It needs 273 seats for a simple majority. The BJP's own tally could be over 210-220 seats, the exit polls predicted. If the exit poll projections come true, India might be heading for a stable government under Mr Modi, something investors have been rooting for.

(Also read: Exit Poll Euphoria: Why Investors Should Be Cautious)

"If the exit polls are accurate, a stable government seems to be a likely prospect. We think the markets will trade at a premium to long term average through 2014 as investors anticipate a spate of reforms which lead to a turn in the economic cycle," said Jyotivardhan Jaipuria of Bank of America Merrill Lynch.

Narendra Modi-led BJP is seen by markets as being more investor- and business-friendly. The Nifty has already surged around 20 per cent since Mr Modi became the BJP prime minister candidate on September 13. A large part of gains have come on account of strong buying by foreign investors, who have purchased cash shares worth about $4.3 billion so far in 2014.

"The exit polls confirm and strengthen our baseline expectation of a stable NDA-led government, which is a positive outcome. This, along with a gradual improvement in the growth outlook in 2015, a credible central bank and easing macro-imbalances bode well for India's medium-term economic prospects," Nomura said in a report.

FIIs bought shares worth around Rs 2,500 crore over the last two sessions. Domestic institutional investors, who have been net sellers in markets so far, also turned buyers on Monday, although the quantum of buying was very small at Rs 90 crore.

Interestingly, NSE's volatility index, or India VIX, fell as much as 13.6 per cent to 32.04 after exit poll results confirmed market expectations of a BJP win.

Retail investors, however, should be cautious even though the consensus outlook on the Street seems to be bullish. That's because exit polls have got it horribly wrong in the past.

Any results that show BJP falling short of a majority could cause shares to plunge 8 to 10 per cent in one day, and up to 20 per cent in the aftermath, analysts say.

Shares of companies tied to the domestic economy led the gains. Bharat Heavy Electricals jumped 10.2 per cent, while Oil and Natural Gas Corp rose 3.9 per cent.

Larsen & Toubro rose 1.6 per cent, while mortgage lender Housing Development Finance Corp ended 1.2 per cent higher. (Top gainers and losers today)

The NSE bank sub-index ended 0.6 per cent higher after earlier hitting a record high at 14,367.75.

State Bank of India gained 1.5 per cent, while Bank of Baroda rose 4.5 per cent.

Among other domestic-oriented stocks, Ambuja Cements surged 4.8 per cent, and Tata Power Co rose 3.7 per cent.

However, Dr. Reddy's Laboratories, India's second-largest drugmaker by sales, slumped 4.1 per cent after its quarterly net profit fell short of analyst estimates due to a rise in expenses.

(With inputs from Reuters)