Sensex, Nifty just shy of record highs; what to do now?

Sensex rallied more than 1,400 points while Nifty vaulted more than 400 points to register their best day in a decade. Indian markets witnessed a blockbuster day after exit polls suggested that the ruling party should be able to get a majority comfortably.

The rise in the market was led by short coverings as well as the formation of fresh positions which is a positive sign for the markets. The S&P BSE Sensex is now 135 points away from its record high of 39,487 while Nifty is just 28 points short.

Investors’ wealth rose by more than Rs 5 lakh crore in just one session. The average market capitalisation of the BSE listed companies rose to Rs 151.93 lakh crore on May 20 compared to Rs 146.58 lakh crore recorded on May 17, Friday.

The final tally – the S&P BSE Sensex rallied 1,421 points to close at 39,352 while Nifty ended 421 points up at 11,828.

“Indian markets expectedly cheered the outcome of the exit polls and Nifty registered its largest point gain since Jan 25, 2009. Nifty is just shy of its all-time high of 11,856. Nevertheless, it ended at its all-time closing high. Markets seem to have almost fully discounted the outcome of final election results,” Dhiraj Relli, MD & CEO, HDFC Securities told Moneycontrol.

“Institutional buying was seen on May 20 (reflected in large cash market volumes of over Rs 44,000 cr) which triggered some amount of short covering. Over the next three days, markets could look up to corporate results or global developments,” he said.

Nifty Bank hit a record high of 30,827 before closing the day at 30,759, up 1,309 points. Strong gains were seen in stocks like Bank of Baroda (up 9.4 percent), IndusInd Bank (up 8.8 percent), SBI (up 7.9 percent) and Yes Bank (7 percent).

More than 50 stock hit a 52-week high on the BSE that include Bajaj Finserv, Shree Cements, Bajaj Finance, HDFC Bank, HDFC, Kotak Bank, Titan Company, Axis Bank, ICICI Bank, SBI and DCB Bank, among others.

Apart from banks, the S&P BSE Capital Goods index rose over 5 percent, followed by BSE Realty index that gained 5.4 percent and the S&P BSE Public Sector that rose 5.3 percent.

The Nifty Midcap index posted its best ever gain in history to close at 17,561, up 686 points, led by gains in Reliance Power (up 17 percent), followed by Indiabulls Ventures (up 16 percent), Adani Power (up 15 percent), Reliance Infra (up 12 percent), and Graphite India (up 11 percent).

What should investors do now?

On the technical charts, the Supertrend indicator and MACD have given a bullish crossover that suggests bulls are likely to dictate short-term trend on D-Street. The index is just 28 points away from its record high level of 11,856 recorded in April.

Nifty is now trading above most of its short term moving averages. Most experts feel that after a sharp rally, there is a high possibility of some consolidation till May 23.

Final results will dictate the near term trend for the markets. Traders who went long on the index should consider booking profits on their long positions, they suggest.

“Usually after this kind of performance, normalcy should return to the markets and hence next two sessions can witness muted response as bulls may try to consolidate their gains,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“Hence, the fortunate traders who happened to be on the long side of the trade can consider booking profits by making use of strong opening in the next session. If the strength on Nifty exceeds beyond 11,856 on closing basis then the rally should ideally get extended up to 12,100,” he said.

Stocks in news:

Shares of A2Z Infra Engineering were locked at 10 percent upper circuit after the company made one-time settlement with SBI and other financial institutions.

VRL Logistics gained 10 percent after the company posted strong numbers for the quarter ended March 2019.

Cipla gained 4 percent after USFDA issued zero observations for its Indore facility.

Shares of Welspun Enterprises rose 10 percent after it received a provisional completion certificate for commencing commercial operation of the Dewas Industrial Water Supply Project w.e.f. April 30, 2019.

Global Update:

European markets traded lower as investors digested geopolitical developments and corporate earnings. The pan-European STOXX 600 slipped 0.6 percent in the morning trade.

Stocks in Asia ended mixed amid a series of geopolitical developments across the region. The Nikkei 225 in Japan added 0.24 percent to close at 21,301.73.

In South Korea, the Kospi closed flat at 2,055.71. The ASX 200 in Australia rose 1.74 percent to close at 6,476.10.