Mumbai: Following the outcome of elections to five state assemblies, market analysts have predicted a positive opening for the Indian equity markets on Tuesday.
With the BJP set to return to power in Uttar Pradesh (UP) after 15 years and the Congress gaining the lead in Punjab, market observers were of the view that the victory of the BJP in UP has great political importance and would infuse positive sentiments in the domestic bourses.
"Considering the fact that its a thumping victory for the BJP, it will be a positive opening for the equity markets. UP is a standout state and politically most important. It will be giving a lot of political equity to the government and this is going to be positive for the markets," Anindya Banerjee, Associate Vice President for Currency Derivatives with Kotak Securities, told IANS on Saturday.
"We can see a gap up opening in the Nifty -- possibly 100 points plus. However, there will be a gap down for the dollar/rupee, possibly at the 66.30-40 levels (indicating strengthening of rupee at the opening level)," he added.
In the state elections, the BJP -- that heads the ruling NDA at the Centre -- swept UP and Uttarakhand, while running neck-and-neck with the Congress in Goa and Manipur. In Punjab, the Congress was headed for a two-third majority.
According to Dhruv Desai, Director and Chief Operating Officer of Tradebulls, a spurt is expected in the equities markets post the assembly election results, especially the UP poll results.
"With the UP mandate, the government may further be emboldened to work towards reforms in all realms of the government which will lead to structural changes in the country over the next seven years," Desai said.
"The rally might propel the NSE Nifty above 9,000 points mark or 120 points upward movement."
Market analysts also pointed out that the sustainability of the impact of the assembly results on the equity markets will depend on a number of global factors such as the outcome of the US Federal Open Market Committee's (FOMC) meet on whether or not to raise interest rates.
Anand James, Chief Market Strategist, Geojit Financial Services, said: "The election results are likely to under deliver in terms of positive surprise as the expectations for the final seat share is not much off from what the markets were pricing in on Friday."
"Having said that, next week -- shortened due to Monday's holiday -- will have its own dynamics, and a knee-jerk upside on Tuesday cannot be ruled out. But it's sustainability purely based on the verdict is doubtful especially with the rate decisions of a flurry of central banks, including FOMC."
On Friday, the benchmark indices had closed with marginal gains on the back of a strong rupee, coupled with fresh inflow of foreign funds and positive global cues.
The wider 51-scrip Nifty of the National Stock Exchange (NSE) closed at 8,934.55 points -- up 7.55 points or 0.08 per cent.
Similarly, the barometer 30-scrip sensitive index (Sensex) of the BSE rose by 17.10 points or 0.06 per cent to close at 28,946.23 points.