Market headed for multi-week rally as exit polls predict big win for BJP- Grow Mudra

Market headed for multi-week rally as exit polls predict big win for BJP

03 Jun , 2024 By : Debdeep Gupta

As most exit polls predicted a landslide victory for the BJP-led NDA, projecting over 350 seats for the coalition, markets are also rejoicing in hopes of the Street's 'bull case' election scenario coming to life. The bullishness that spread over the Street in the hopes of BJP's return to power for a third term has pushed Indian benchmarks, the Nifty 50 and Sensex to scale new record highs, with both surging over 2.5 percent.

Building on the bullishness, Rohit Srivastava, founder and market strategist at Indiacharts.com believes that the market is set for a multi-week rally, likely to be driven by huge short covering from Foreign Institutional Investors (FIIs).

FIIs significantly increased their short positioning in the Indian derivatives markets between May 30-31, which pushed the long-short ratio to its lowest level since October 2023. This sharp action led to the FII long-short ratio plummeting from 50 percent to just 13 percent, implying the dominance of short positions.

According to Srivastava, it is this sharp spike in short positions that has created the perfect technical setup for a multi-week uptrend. "Such a huge short positioning from FIIs may take some time to liquidate, which will trigger a multi-week rally in the market," Srivastava said in an interaction

However, after the sharp gains seen in today's session, Srivastava also sees scope for a rather flat trade on June 4, the day when election results are slated to be announced.

"If we see a significant surge in the current session, there is a possibility that tomorrow could also be a day of flat trade as the market would factor in all the gains likely to be made by the BJP today itself. In the event of a sharp surge, the market may already discount the BJP winning around 350 seats," Srivastava added.

As of 09.57 am, the Sensex was up 2,015.53 points or 2.73 percent at 75,976.84, and the Nifty was up 629.20 points or 2.79 percent at 23,159.90. Both the indices scaled their record highs of 76,738.89 and 23,338.70, respectively. Market breadth also tilted heavily in favor of gainers as over four stocks rose for each one that fell.