Record highs for Sensex, Nifty as election outcome anxiety subsides and RBI dividend energises

Demolishing general election 2024 outcome-related jitters, India’s equity market made stellar gains on Wednesday.

The benchmark indexes — BSE Sensex and NSE Nifty — closed the session with a gain of more than 1.60 percentage points each after hitting fresh peak levels. Nifty50, which almost touched the 23,000 level, closed the session at 22,967.65, up 1.63%. It hit a fresh high of 22,963.60 on Wednesday. The 30-share Sensex hit a high of 75,500 before settling at 75,418, up 1.61%.

“The Nifty hitting a new record is the market’s message of political stability after the elections. The rally is healthy since it is led by fairly valued large-caps,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

The Reserve Bank of India’s (RBI) announcement of a record ₹2.11 lakh crore dividend to the Centre for FY24 also boosted sentiments. Market experts believe this is akin to an indirect rate cut and is expected to reduce bond yields.

“This development is a significant macroeconomic positive for the market, with direct implications for the fiscal deficit and bond yields. The infusion of funds is akin to an indirect rate cut for the economy, as it is expected to lead to a reduction in bond yields. Since many investment instruments are linked to government bond yields, this reduction will likely have a broad positive impact across the financial markets. The improved fiscal position could also prompt upgrades in India’s economic outlook,” said Santosh Meena, Head of Research at Swastika Investmart.

Meena added there is now an anticipation that Foreign Institutional Investors (FIIs) may shift to buying, which would provide additional support to the market. Looking ahead, the Nifty index may witness further expansion and an immediate target of 23,000 is in sight, with the possibility of reaching 24,000 as the election outcome approaches, he added.