Bulls break into a short run ahead of exit poll results

MUMBAI: Stock indices surged over 1% on Friday as traders squared off bearish bets ahead of exit polls on Sunday evening after the end of the final phase of polling. The direction of the market early next week will be decided by these exit poll projections and the declaration of final results on May 23.

The Sensex surged 537.29 points, or 1.4%, to close at 37,930.77 and Nifty climbed 150 points, or 1.3%, ending at11,407.15. In the broader market, BSE MidCap index ended up 1% and the BSE SmallCap index ended 0.5% higher.


“Shorts were covered because exit poll is on Sunday. People may not want to carry position forward before the event. Market trend was also down for the last two weeks,” said Piyush Garg, chief investment officer at ICICI Securities.

“If exit polls show NDA winning 300-plus seats, market will open 1-1.5% higher. If they show NDA winning less than 250 seats, it will see a gap down opening,” said Garg.

Sensex and Nifty, which were trading weak till Wednesday on account of the US-China trade tensions, managed to eke out gains of over 1% for the week thanks to the rebound in last two days. In May so far, both are down nearly 3%. Foreign portfolio investors continued their selling spree and sold into this rally. FPIs offloaded Indian stocks worth ?1,057.82 crore on Friday as per provisional data, taking their net sales so far in May to ?4,900 crore.

DII Purchases in May: Rs 8.8k crore

DII flows on Friday stood at Rs 1,800 crore. They have net purchased Indian stocks worth Rs 8,800 crore in May (including Friday’s provisional data).

Among stocks, Bajaj Finance surged 6.1% to close at Rs 3,301.20, becoming the top gainer on the Sensex after reporting strong fourth quarter results. Auto and consumer stocks, which had taken a severe beating in the recent market selloff, were also among the gainers — Hero MotoCorp, Maruti Suzuki India, Kotak Mahindra Bank, Bajaj Auto and Hindustan Unilever ended up 3-4%. Most sector indices on the NSE ended in the green, up 1-3%. The pharma index, however, slid 1.5%. The volatility index India VIX slid nearly 1% to 28.11 but remained near a four-year high.

“Most people are sitting on the sidelines. Market will see action on Monday after the exit polls,” said Andrew Holland, CEO at Avendus Capital-Alternative Strategies.

"Currently, opinion polls point to a hung Parliament, with the BJP as the single largest party. Regional party alliances will likely prove to be the key,” said Bank of America Merrill Lynch in a note on Friday.

“On balance, while elections obviously pose an event risk for markets, the Indian economic cycle is far more driven by the global cycle,” it said. Markets have priced in the Narendra Modi-led coalition’s return to power. Indian markets rallied 10% from February lows till April 18, when it hit record highs on expectation that the current government will return for a second term. This sentiment was fuelled by the government’s strong stance on national security after the terrorist attack at Pulwama.

Since then, markets have retreated on global headwinds such as rising oil prices and escalating trade tensions between US and China. For now, the US-China tensions have taken a backseat with investors focusing on the exit polls.

“We continue to consider this a close-to-call election, though our baseline remains one of the Modi administration clinging on to power for a second term,” said a note by ING Bank NV.