Indian stock market ended another day in the green, fueled by the BJP and its allies securing a decisive victory in the Maharashtra state elections, providing a much-needed boost to the markets, which had been under pressure from weak Q2 earnings and persistent FPI selling.
The Nifty 50 extended its winning streak to the second straight session on Monday, November 25, gaining 1.32% to settle at 24,221. The Sensex also ended the session higher, gaining 1.25% to close at 80,109 points, rising for the second day in a row.
The broader market saw sharp gains as well, with the Nifty Midcap 100 index rising by 1.61%, settling at 55,900, while the Nifty Smallcap 100 index recorded an even larger gain of 2.03% and closed at 18,115.
With today's rally, the overall market capitalisation of BSE-listed firms jumped to ₹440 lakh crore, marking a gain of ₹7 lakh crore from the previous day's close of ₹433 lakh crore.
All major sectoral indices finished the day on a strong note, with the PSU pack showing notable upward momentum, driven by expectations of a resumption in capex growth. The Nifty PSU Bank surged 4.09%, followed by Nifty Oil & Gas, Nifty PSE, Nifty Infra, Nifty Energy, and Bank Nifty, which rose between 1.7% and 3%.
Among individual stocks, 42 out of the 50 constituents of the Nifty 50 index ended in positive territory, with Oil and Natural Gas Corporation (ONGC) leading the gains, rising by 5.1%. It was followed by Bharat Electronics, L&T, BCPL, SBI, Shriram Finance, Apollo Hospitals, Wipro, Adani Ports & SEZ, HDFC Bank, ICICI Bank, and three other stocks, all closing with gains of up to 2%.
Commenting on today's market performance, Vinod Nair, Head of Research, Geojit Financial Services said, “Major state election results lifted market sentiment and increased the scope of stability in government spending in H2FY25 to meet the capex target.”
"The rally was broad-based, while capex-linked sectors like infra, capital goods, and industrials outperformed in expectation of a surge in new order inflows. The prospects of H2 remain positive due to a good monsoon, festival, and marriage season, which could ease the impact of earnings downgrades that happened in Q2," he added.
Following this crucial win in Maharashtra, analysts now anticipate that the focus of the central government will shift towards ramping up capital expenditure (capex), which is currently falling behind the FY2025 budget estimates (FY2025BE) targets. The government is also expected to expedite the completion of numerous ongoing projects.
Markets have seen a decent correction in the last two months, with the Nifty50/Nifty Midcap 100/Nifty Smallcap 100 falling 9% on the back of moderate corporate earnings in 1HFY25, relentless FII selling since October 2024, a fragile geopolitical backdrop, and a strengthening dollar index after the victory of Donald Trump in the US election.
The anxiety around Maharashtra elections had further muddied the waters. With the elections now behind and the BJP gaining a significant boost from its victories in Haryana and Maharashtra, domestic brokerage Motilal Oswal anticipates that the government will shift its focus toward increased spending. Notably, government spending in 1HFY25 has remained flat YoY, while Capex spending has declined by 17%.
This poll result, coupled with a recovery in rural spending (on the back of a good monsoon and expected strong Kharif output), should improve the demand narrative at the margin. The wedding season in 2HFY25 (30% higher weddings YoY) will also provide a fillip to demand, the brokerage underscored.
Motilal Oswal said, "The change in sentiment can initiate a mini-risk-on rally, in our view. Given the recent correction, we believe valuations, especially for large-caps, are quite reasonable now at 19.3x FY26E EPS. Mid-caps and small-caps are still trading at expensive valuations, with NSE Midcap 100/NSE Smallcap 100 trading at a P/E of 30x/23x. The volatile geopolitical backdrop and movement in the dollar index will be the near-term monitorables."
The brokerage listed BFSI (private as well as PSU and non-lending NBFC), capital goods, real estate, manufacturing, consumer discretionary, IT, and healthcare as its preferred sectors.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
