Cheering the BJP’s landslide win in Uttar Pradesh, the Nifty soared to new all-time highs on Tuesday. The Sensex rose as much as 600 points to 29,561 while Nifty surged 188 points to record high of 9,122. The rupee also strengthened to nearly 1-year high of 66.17 against the US dollar, rising 43 paise from Friday’s close of 66.60.
Analysts say that the decisive mandate in Uttar Pradesh in favour of the BJP removes political uncertainty from the market, which had kept investors cautious in the run-up to the announcement of the election results. Markets will price in a stable government for long, says global brokerage Macquarie. Investor wealth on the BSE soared by Rs. 1.31 lakh crore.
Analysts said that the Uttar Pradesh state election results will give a boost to the government’s reform agenda. “BJP’s emphatic victory in the politically crucial state of UP would embolden the Prime Minister Narendra Modi in aggressively expediting key structural economic reforms,” said Ajay Bodke, head of portfolio management services at financial firm Prabhudas Lilladher in Mumbai.
Analysts see further upside in the market. TS Harihar, chief executive of HRBV Client Solutions Private Ltd, says the election verdict will move Nifty into a new range of 9100-9500. Another global brokerage CLSA sees Nifty rising to 10,350-12,000 levels over the medium term if it breaks the major technical resistance of 9.191. Bank of America Merrill Lynch expects the government to increase infrastructure spending in Uttar Pradesh and sees banks, cement, and consumption stocks to be a major beneficiary of higher government spending.