Sensex and Nifty Rally 1% Each as Maharashtra Poll Results Lift Investor Sentiment - Read Now
The Indian stock market ended the week on a high note, fueled by the BJP-led alliance’s decisive victory in the Maharashtra state elections. Investor sentiment saw a substantial boost, with the Sensex gaining 1.25% to close at 80,109 points, and the Nifty 50 rising 1.32% to settle at 24,221 points. The rally added a whopping ₹7 lakh crore to investor wealth.
Market Performance: A Day of Gains Across Indices
The broader markets mirrored the bullish trend:
- Nifty Midcap 100: Climbed 1.61% to close at 55,900 points.
- Nifty Smallcap 100: Surged 2.03%, ending at 18,115 points.
Sectoral indices also registered strong performances, with PSU Bank leading the charge:
- Nifty PSU Bank: Jumped 4.09%.
- Nifty Oil & Gas, PSE, Infra, Energy, and Bank Nifty: Posted gains ranging from 1.71% to 3%.
Key Gainers: ONGC Leads the Pack
Among individual stocks, 42 out of 50 Nifty constituents ended in the green. Top performers included:
- Oil and Natural Gas Corporation (ONGC): Up 5.1%.
- Bharat Electronics, L&T, SBI, Shriram Finance, Apollo Hospitals, Wipro, Adani Ports & SEZ, HDFC Bank, and ICICI Bank: Gained up to 2%.
Why the Rally? Maharashtra Polls and Market Sentiment
The BJP’s victory in Maharashtra and Haryana provided a much-needed lift to market sentiment, which had been under pressure due to:
- Weak Q2 corporate earnings.
- Persistent foreign portfolio investor (FPI) outflows since October 2024.
- A challenging global geopolitical environment.
The election results are expected to bring policy continuity and increased focus on capital expenditure (capex). This, coupled with a recovery in rural spending and the festive wedding season in 2HFY25, is likely to improve the demand outlook.
Expert Insights: What Analysts Are Saying
Vinod Nair, Geojit Financial Services
"The major state election results lifted market sentiment and increased the scope for stability in government spending in H2FY25 to meet the capex target. The rally was broad-based, with capex-linked sectors like infra, capital goods, and industrials outperforming."
Motilal Oswal
"The sentiment shift could trigger a mini-risk-on rally. Large-cap stocks, trading at a reasonable valuation of 19.3x FY26E EPS, look particularly attractive. However, midcaps and small caps remain expensive at P/E ratios of 30x and 23x, respectively."
Capex-Driven Growth and Policy Implications
The government’s capital expenditure has lagged behind its FY2025 budget targets, with spending declining by 17% YoY in 1HFY25. Analysts believe the election results will enable the government to:
- Ramp up capex projects.
- Expedite the completion of ongoing infrastructure developments.
- Boost rural spending through improved agricultural output and Kharif crop performance.
The wedding season in 2HFY25, with 30% more weddings YoY, is expected to provide a significant demand boost for consumer discretionary goods and services.
Sectoral Outlook: Preferred Sectors for Investors
Brokerages are bullish on specific sectors that stand to benefit from policy stability and capex-driven growth:
- BFSI (Banking and Financial Services): Both private and PSU banks are expected to gain from increased credit demand.
- Capital Goods and Infrastructure: Anticipated surge in new order inflows.
- Consumer Discretionary: Demand recovery from festive and wedding seasons.
- IT and Healthcare: Defensive plays with strong growth potential.
- Real Estate and Manufacturing: Benefiting from rising urbanization and government spending.
Large-Cap Valuations: A Sweet Spot for Investors
The recent market correction has brought large-cap stocks into an attractive valuation range, with the Nifty 50 trading at 19.3x FY26E EPS. In contrast, midcap and small-cap indices remain expensive, creating an opportunity for investors to focus on high-quality large-cap names.
What Lies Ahead? Key Monitorables
While the market has reacted positively to the election results, near-term risks include:
- Geopolitical Uncertainty: Ongoing global tensions and the impact of a strengthening dollar index.
- Earnings Growth: The market awaits better corporate performance in H2FY25.
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