Sensex Snaps Three-Session Rally As Investors Await Election Results
Markets should be quiet on Wednesday ahead of the election results on May 23, says CK Narayan.
Indian equity indices snapped a three-session rally as euphoria around exit polls that predicted Prime Minister Narendra Modi’s re-election ebbed and investors exercised caution ahead of the Lok Sabha election results on May 23.
The S&P BSE Sensex dropped 1 percent or 323 points to 38,969 at close, after rising to a record high earlier in the day. The NSE Nifty 50 Index too closed 1 percent lower, just above the 11,700-mark.
“Profit-booking by traders in a hollow market, with absence of buyers became a domino of its own on an intraday basis,” Growth Avenues Asset Advisors’ CK Narayan told BloombergQuint over the phone. “After two days of strong momentum on either side, markets should be quiet on Wednesday ahead of the main event i.e. election results on May 23.”
Joindre Capital Services’ Avinash Gorakshakar concurred. “Investors are currently trading based on election sentiments and will start looking at valuations only after the results,” he told BloombergQuint.
The Nifty is trading at 20.2 times its 12-month forward earnings. That’s higher than the five-year average of 18.4 times
The Sensex, which clocked its best single-day gains in nearly six years on Monday, had added over 2,200 points in the previous three sessions. “Most of the rally in the market was led by index heavyweights and financials,” TCG Asset Management's Managing Director Chakri Lokapriya told BloombergQuint. “The rest of the market might join after the election results are in line with the exit polls.”
Six exit polls released on Sunday indicated a comfortable win for the National Democratic Alliance. The unanimity in forecasts was underscored by four polls predicting the Bharatiya Janata Party-led alliance to return to power with over 300 of the 542 Lok Sabha seats.
U-Turn
The Nifty, Sensex and NSE Nifty Bank Index hit their life-time highs before turning negative in Tuesday’s trade. By the end of the session, the market breadth was tilted in favour of sellers, with 1,145 stocks falling compared to 609 stocks advancing on the National Stock Exchange. All the sectoral gauges compiled by the NSE ended lower, led by the NSE Nifty Auto Index’s 2.5 percent fall.
- Twenty-eight of the 31 Sensex constituents and 43 of the 50 Nifty companies declined.
- Tata Motors Ltd. was the worst performer in the Nifty, falling 7 percent, even after reporting better-than-expected March quarter earnings.
- Reliance Industries Ltd. and Hindustan Unilever Ltd. rose around 1 percent each, while Dr. Reddy’s Laboratories Ltd. was the top gainer, rising 3 percent.
- The NSE Volatility Index jumped 8.4 percent, rebounding from Monday’s 16 percent plunge.