On December 4, the market witnessed a robust opening, with the Nifty 50 and Sensex achieving new milestones as investors celebrated the BJP’s resounding victory in three Hindi Heartland states. This electoral success is seen as a sign of political stability, alleviating concerns about populism.

By 9:30 am, the Sensex surged over 1,000 points, or 1.5 percent, reaching 68,525, while the Nifty gained over 300 points, or 1.5 percent, approaching 20,600. Both indices marked historic highs, with the Sensex hitting 68,587.82 and the Nifty reaching 20,602.50 shortly after the market opened. All sectors demonstrated positive momentum, with nearly five stocks rising for each one that fell.

Several factors contributed to this strong rally:

  1. BJP’s Dominant Performance in State Elections: The BJP’s decisive victory in Rajasthan, Madhya Pradesh, and Chhattisgarh, three out of the four key states that recently voted for new assemblies, eased concerns about fiscal populism and political risks. This electoral outcome generated positive momentum across the market, favoring political stability and a reform-oriented, market-friendly government.
  2. Positive Global Trends: The global backdrop was favorable, with strong gains in the benchmark indices in the US on Friday and Asian markets inching higher. Additionally, declining oil prices, US 10-year bond yields, and the dollar index further boosted market sentiment.
  3. Expectations of Peaking Interest Rates: Signs of inflation cooling down have led investors to anticipate that the US Federal Reserve may halt its rate hike regime at its meeting on December 12-13. The market also anticipates the Fed starting to cut rates by mid-2024, contributing to positive sentiments. This expectation aligns with projections that the Reserve Bank of India will refrain from further interest rate hikes.
  4. Return of Foreign Institutional Investors (FIIs): After being net sellers for three consecutive months, FIIs returned as net buyers in November, purchasing domestic equities worth Rs 5,795.05 crore. This trend continued into December, with FIIs buying equities worth Rs 1,589.61 crore in the first session of the month. Rollover data indicates a decline in short positions and some addition of longs, suggesting a potential continuation of this buying momentum.

Analysts foresee strong domestic market gains buoyed by the election results, with expectations of the Nifty reaching the 20,800 mark in the coming sessions. Jefferies and PhillipCapital both express optimism, reinforcing consensus expectations of a Modi win in the 2024 general elections. Global market trends, interest rate expectations, and FII activity are closely monitored factors influencing market sentiment.