As the domestic benchmark indices, Sensex and Nifty 50, surged continuously for three days, all eyes are now on the political drama unfolding in Delhi.
With Narendra Modi sworn in for his third consecutive term as Prime Minister on June 9, the Indian stock market is poised for potential positive developments in the following week.
This surge follows the Reserve Bank of India’s (RBI) announcement, which raised the GDP growth forecast to 7.2% for 2024–25 from a previous 7%.
Sensex and Nifty 50 Performance on Friday
On Friday’s trading, the 30-share BSE Sensex saw an impressive rise of 1,720.8 points, or 2.29%, reaching a new record high of 76,795.31. The Sensex closed at 76,693.36, up 1,618.85 points, or 2.16%.
Similarly, the NSE Nifty rose 498.8 points, or 2.18%, to 23,320.20 during the day. But the Nifty 50 closed at an all-time high of 23,290.15, up 468.75 points (2.05%).
Key Drivers of the Nifty Rally
Positive global markets fueled the Indian market further last week after a massive sell-off after exit poll day. Investors saw impressive value in buying consumer stocks, despite their high valuations.
The market participants expected the new coalition government to prioritize support for the poor over capital expenditures. This led to a rally in consumer stocks.
Additionally, a 20–30% retracement in traders’ favorite PSU stocks, banks, and financials brought more buying interest, leading to a further rally in the market.
Initially, the market anticipated turbulence from NDA partners, but the absence of negative comments from any coalition party further boosted buyer sentiment on Indian bourses.
At least for now, the market has received a hint of a stable NDA government under Narendra Modi.
The India VIX also plunged 32% last week from a gigantic rally of around 150% from the low. It indicates lower risk expectations among market participants.
Political Developments and Market Outlook for this Week
In a significant political development, Narendra Modi was sworn in on June 9 in Delhi as the Prime Minister of India for the third consecutive term. This event may positively impact the Indian stock market in the coming week.
The distribution of ministerial positions in the coalition government will be closely watched, with key ministries such as Finance, Defense, Home, and External Affairs. This will potentially boost market sentiment further this week.
The market anticipates that a market-friendly distribution of these crucial ministerial roles will fuel a continued rally. A well-received ministerial lineup could push major indices like Nifty, Sensex, and Bank Nifty to new all-time highs.
However, traders should remain cautious of potential profit booking after the recent strong bounce back from the lows experienced on the counting day of the Lok Sabha election.
On Tuesday, June 4, the Indian stock market faced a significant plunge, marking the biggest sell-off in the last four years.
Despite the initial sell-off, value buying from the lows brought the market back to new bullish territory, though many stocks have yet to reach their recent highs.
Upcoming Market Influencers
Following are the key data sets that can influence the Indian stock market this week:
- India’s WPI inflation
- China’s CPI inflation
- UK GDP data
- US core CPI and CPI data
- US PPI data
- US Fed’s interest rate decision
Nifty 50 Outlook for the Week (June 10 to June 14 )
The rally of the Nifty will depend on the political development of the new NDA coalition government. On the daily chart, 21300 is an important support for the Nifty 50, acting as a 200-day EMA.
Also, it bounced sharply from the low of 21281.45 on Tuesday, June 4, a notable bounce of 9.5%, to the high of 23320.20.
As 23338.7 is an all-time high for the Nifty 50, it has to break and sustain above it for an extended rally this week.
Conclusion
As the new government takes shape, the market will be keenly watching for signs of continued reform and stability, which could fuel further gains.
Allocation of portfolios to expected candidates could have a highly positive impact on Indian stock indices. That could potentially drive them to the blue sky zone.
However, caution is advised due to domestic and potential global influences and continued selling pressure from foreign institutional investors.
