Market salutes Modi's third term: Sensex-Nifty opened at all-time high

At the time of filing this report, the Sensex was at 76,890.34, up 0.3 percent, and the Nifty was at 23,372 points, up 0.4 percent. They hit their record highs at 76,960.96 points and 23,411.90 points, respectively, at the opening today. Most sectoral indices were in the green.

Analysts believe that as the week progresses, investors will keep an eye on the upcoming US Fed interest rate decision, India's inflation data (both retail and wholesale) and the decisions of the new government. The market will also keep an eye on the allocation of ministries to the newly sworn-in ministers.

India's retail inflation eased to 4.83 per cent in April from 4.85 per cent in March. However, consumer food price inflation rose to 8.70 per cent from 8.52 per cent in the previous month. Retail inflation in India, though within the RBI's comfort zone of 2-6 per cent, remains above the ideal 4 per cent scenario.

Ajit Mishra, Senior Vice President (Research), Religare Broking Ltd, said, “Participants will closely monitor global cues, especially the upcoming US Fed meeting. The recovery after the post-election decline shows resilience among participants and we expect the current trend to continue.”

“The resurgence of participation from sectors like IT and FMCG, which were earlier on the sidelines, boosts our confidence. However, traders should remain cautious and focus on stocks that are moving in line with the benchmarks,” Mishra said.

“Next week's focus will be on allocations for key Cabinet portfolios such as finance, defence, roads, power, commerce and railways. The market will continue to remain volatile and the bias will remain on the upside,” Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services Ltd, said over the weekend.

Dalal Street was expecting a historic surge in benchmark indices after the exit polls, but they failed to see what was going to happen the very next day. On the day of the poll results, i.e. June 4, the market witnessed a huge turmoil when the Sensex fell by a massive 4,389.73 points, while the Nifty fell by 1,379.40 points.

Indian stock markets witnessed huge volatility on the day of declaration of Lok Sabha election results, where the incumbent BJP performed below expectations and looked like it would fall short of exit poll projections and secure a majority on its own. However, the National Democratic Alliance (NDA) eventually managed to secure a comfortable majority.

Many investors booked profits a day after exit polls indicated a comfortable majority for the BJP.

All the losses incurred on June 4 were recovered in the next few sessions and the indices returned to their record highs.

VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services said, “The market is likely to take a breather after last week's volatility. It is important to understand that the main driving force in this bull market is Indian retail investors including HNIs. The large selling by FIIs is being mitigated by aggressive buying by DIIs and retail investors. The fact that retail investors bought equities worth Rs 21179 crore on June 4, a day when Nifty declined 5.9 per cent, reflects the buying power and optimism of retail investors.”

“This is a structural long-term trend. FII selling on high valuation concerns will be easily absorbed by DII and retail buying. So, if FIIs swim against this trend, they will underperform in one of the best-performing stock markets in the world. That being said, retail investors should not chase high-valued mid and small caps. The safety is in large caps.”