Sensex and Nifty closed 3.2 percent higher on June 5, driven by value buying after both benchmarks fell nearly 6 percent in the previous session. Banks, automobile, and FMCG stocks led the gains in Nifty.
"The previous session was a bit of surprise for the market. However, now that it is clear that the BJP will come back to power, the markets saw a bump up in trend," said Sanjeev Hota, Head of Research, Sharekhan.
At close, the Sensex was up 2,303 points or 3.2 percent at 74,382 and the Nifty 50 was up 689 points at 22,573. About 2,321 shares advanced, 1,031 shares declined, and 76 shares remained unchanged.
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Nifty and Sensex declined by nearly 6 percent on June 4 as the BJP-led NDA coalition narrowly won the 2024 national elections.
Hota advised that in the near term, traders should realign their portfolios toward defensive sectors such as FMCG, pharma, and IT. "On the flip side, cyclical stocks in capital goods, defence, infra, real estate and PSUs will be more vulnerable for further correction after the run they saw in the last two years," he said.
Investors are betting on stocks such as FMCG as they are not related to the election outcome, said Karan Taurani, Senior VP of Research at Elara Capital.
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All 13 sectoral indices gained today. Nifty Bank, Nifty Auto, and Nifty FMCG advanced by over 4 percent each.
Excluding Bharat Petroleum and L&T, the remaining 48 companies in the Nifty 50 index posted gains. HDFC Bank, ICICI Bank, and RIL led the surge in Nifty.
Today, the volatility gauge India VIX, fell 29 percent to 19. On June 4, volatility index had risen to 30.
Market experts expect volatility and choppiness to continue until there is clarity on the cabinet and the key portfolios. However, market participants remain constructive on the long-term potential of the Indian market.
"Investors should keep in mind that a BJP-led coalition government is not necessarily bad for the economy, and this is not the first time we will see a coalition government," said Vaibhav Porwal, Co-founder, Dezerv. Porwal pointed out that from 1989 to 2014, India's GDP grew over 8 percent annually while a coalition government at the Centre.
"As the speculative trades built around election results unwind and as clarity around the new government emerges, markets will find their ground," he said.
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