Indian shares surge as Modi's allies pledge support to form govt

FE Team | Published: June 06, 2024 00:58:45

BENGALURU, June 5 (Reuters): Indian shares jumped over 3 per cent on Wednesday, marking its best one-day gain in over three years after key allies pledged their support to form a new government following a narrow win for Prime Minister Narendra Modi's alliance.
The NSE Nifty 50 index ended up 3.4 per cent at 22,620.35 points and the S&P BSE Sensex rose 3.2 per cent at 74,382.
The Nifty saw its best percentage gain since Feb 1, 2021, when union budget-related announcements drove the market up nearly 5 per cent.
Prime Minister Modi is expected to be sworn-in for a rare third term on June 8, after the Telugu Desam Party and Janata Dal (United) pledged their continued support a day after a humbling election verdict saw his Bharatiya Janata Party lose its majority in parliament.
The benchmark indexes closed nearly 6 per cent lower on Tuesday, recording its worst session since March 2020.
"The support pledged by the allies has given confidence to the market as there were uncertainties around this," said Deepak Jasani, head of retail research at HDFC Securities.
Heavyweight bank stocks surged 4.5 per cent, while the financial services index jumped 4.2 per cent. Both the indexes dropped nearly 8 per cent on Tuesday.
The Nifty Volatility Index a gauge for domestic market volatility fell to its lowest since May 27 at 18.66.
Meanwhile, foreign institutional investors (FIIs) sold a record 124.36 billion rupees (about $1.5 billion) worth of Indian shares on Tuesday, provisional data from the National Stock Exchange showed.
The ECB is widely expected to cut rates tomorrow.
Neeraj Dewan, director at brokerage Quantum Securities said there may be some sectoral rotations until there was clarity around policy decisions.
Consumer goods stocks surged 4 per cent, while auto stocks gained 4.2 per cent on expectations of rural demand. IT were up 2.4 per cent.
Adani Ports surged 8.5 per cent and was the top gainer in the Nifty 50 index, after falling over 21 per cent in the previous session.
Some analysts also said a fall in Indian equities could present an opportunity to buy stocks.
"Broad policy continuity, macroeconomic resilience and strong growth fundamentals should keep relative appeal for Indian equities intact," Goldman Sachs said in a note.
"We also expect foreign flows to return, given this event risk is behind us now, especially in the light of weak flows so far this year and multi-year low foreign positioning," Goldman said.