Dalal Street bull run has begun as BJP takes control
The results of the general elections have resulted in a change in Government as was widely expected. The results show that the Government would be stable having won a simple majority on its own. The BJP has won 282 of the 543 seats and the NDA alliance has won 332 seats.
Narendra Modi led his party to a mammoth win in the Lok Sabha polls. PICS/AFP
The outgoing Government has been decimated and failed to qualify even as the Leader of the Opposition as they do not have the minimum mandatory 10 per cent seats in the lower house. The Congress tally was 44 seats with the performance in UP, which sends 80 lawmakers to Parliament ending at just two seats.
The lotus, BJP’s symbol is omnipresent with this sweeping victory
The performance of the BJP which is their best ever is also the first time since 1984 where a single party has a majority on its own. So strong was this performance that the markets went ballistic on Friday. The intraday high on Friday on the Sensex was 25,375 and on the Nifty was 7,563 points. That the markets closed substantially lower is another story, but in the course of the day have opened new targets for the market to travel.
The BSESENSEX had a great week without doubt and gained 1,127.51 points or 5.15 per cent to close at 24,121.74 points. The Nifty gained 344.20 points or 5.02 per cent to close at 7,203.00 points. The BSE100, BSE200 and BSE500 gained 5.56 per cent, 5.34 per cent and 5.15 per cent respectively, while the BSEMIDCAP gained 4.15 per cent and BSESMALLCAP gained 3.85 per cent.
In sectors the top gainer was BSEREALTY up 13.03 per cent, followed by BSEPSU up 12.00 per cent and BSEPOWER up 11.86 per cent. Momentum player BSEBANKEX was up 8.10 per cent. There was only one loser in BSEHEALTHCARE down 3.30 per cent. Stocks from the IT and Pharma space continue to be under pressure with the rupee strengthening.
In individual stocks, the gainers were led by Power Finance up 27.83 per cent and Canara Bank up 26.56 per cent. Other gainers included Union Bank up 25.55 per cent, BHEL up 18.34 per cent, Sesa Sterlite up 17.27 per cent an IOC up 14.03 per cent. There were very few losers and they were led by Dr Reddy down 11.30 per cent and Tata Coffee down 10.75 per cent.
FIIs have been aggressive buyers all through the week and they made purchases of R 9,671 crores while domestic institutions were sellers of R 1,700 crores. Domestic mutual funds are facing redemption pressure at higher levels in the market. The Indian rupee has turned quite strong what with huge FII inflows and closed at R 58.79, its best level in the last 10 months. The Dow Jones closed at 16,491.31 points, down 92.03 points or 0.55 per cent.
Retail investors have so far been quite neutral to the markets and have used every rally to exit the market. With a stable Government and a clear mandate for them, it is quite likely that retail investors may now test the market. If they do, it would be good for them. The current rally is part of a bigger bull market rally and it is likely to be in place for a minimum of three years.
Key areas where the new Government needs to act on a war footing are inflation, corruption and clearance of stalled projects. It would be of paramount importance that the Government kick-starts the economy which has stalled for quite some time. There is a decision which the Government needs to take instantly on gas prices. The approach on this issue would show the Government's firmness with which they handle such a sensitive issue.
The RBI governor would be announcing the review in June and it would be of importance to see how the old governor and the new government agree or disagree on the state of the economy. The budget is roughly eight weeks away but discussions on the budget would begin in a couple of weeks time.
The mandate to the Government is to take tough decisions and turn around the economy. With no coalition politics or coalition drama, they can take those tough decisions and turn the economy around. A strengthening rupee will help in case of petroleum products and assist the government in bringing diesel prices to market driven prices faster than assumed.
PSU shares other than the banking space which has run up look quite promising. Besides these companies, those involved in road building, capital goods manufacturers and companies involved with defence look good bets in the coming quarters. The rally has begun and we have a good three to five years to go before this new bull run gets over. Enjoy the run but remember you cannot fast forward your gains.
The markets are likely to see big buying on Monday and in the coming week from those FIIs who had to wait till the election results were declared in total. I believe there would be close to double the amount invested last week flowing in. If FIIs continue to remain bullish and the government starts taking action to contain inflation and kick start the economy, the beginning has been made. This would give the impetus that is needed.
The budget would provide the direction and vision statement of the new Government. In conclusion, it’s been a really thrilling election which has many firsts to its credit. As they say well begun is half done. If the mandate of the people is to be respected, this Government has been given all that it could have expected and it now needs to meet the aspirations of its people. Enjoy the bull run as it unfolds.
Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd. Readers are invited to read more about these and other issues on his website http://ak57.in
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