Sensex, Nifty close nearly 1% higher extending previous session's rally

India VIX falls 11 percent to 16.8

Benchmark Indian equity indices extended gains from the third session and ended higher on June 6 as Prime Minister Narendra Modi was set to come back to power for a third term.

Sensex and Nifty witnessed a choppy session through the day, which market experts attributed to NSE Nifty 50 weekly derivatives expiry.

At close, the Sensex was up 692 points or 0.9 percent at 75,074 and the Nifty 50 was up 201 points at 22,821. About 2,700 shares advanced, 703 shares declined, and 68 shares were unchanged.

IT, financial services, and oil and gas stocks drove the Nifty higher today. Defensive sectors like FMCG and pharma were the biggest laggards, shedding the previous session’s gains.

Nifty Energy, Nifty PSU Bank, and Nifty IT gained 1-3 percent.

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Capex-related stocks, such as capital goods, realty, and PSUs saw a renewed buying interest today. They had taken a hit in the past two sessions after Modi’s Bharatiya Janata Party failed to achieve the Lok Sabha majority on its own.

However, the markets are now discounting the difficulty of a coalition government, eyeing a continuation of development economic policies. "It is a coalition government and there could be some give and take here and there, but broadly the direction of the economy and policy making should remain the same. I think that should give us a lot of comfort," said Prashant Jain, CIO, 3P Investment.

Yet, some market participants worry that the BJP’s reliance on allies might hinder economic reforms, impacting growth and corporate earnings.

With election jitters fading, Indian markets are now likely to begin taking cues from global trends. Over the past month, general elections had been the primary driver for the Indian market. Now, the upcoming budget, policies, and geopolitical developments will start influencing the markets.

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"As the market returns to normalcy after the abnormal volatility of the last three days, the global construct has turned favourable with a rising possibility of rate cuts by the Fed," said V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

The May private payrolls report released on June 5 suggested easing of the labour market, which could prompt the US Fed to begin cutting rates this year.

Both benchmark indices had opened higher as election uncertainty ended on June 4 with the BJP set to return to power, albeit in an alliance.

Investors are also looking forward to the outcome of the RBI MPC meeting from June 5-7, which will provide further market cues.

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