Story of the Day
We’re finally here, just one day before the exit polls of the elections come out. After tomorrow’s polling, media houses will rush to release exit poll numbers, which will influence the markets on Monday, with the actual counting taking place on Tuesday. Depending on the consensus among various exit polls, we could see significant market swings on Monday. If there’s a general agreement among the exit polls, the market might treat it as the likely final result, with June 4th confirming the actual outcome.
The market has been nervous, but Adani stocks are indicating market expectations. Adani stocks surged today, with gains ranging from 3% to 10%. This suggests that the market expects the current government to continue, as Adani stocks are perceived to benefit from a good relationship with the government. While this may or may not be accurate, it reflects the market’s anticipation. If the expectation is unmet, we could see a severe downturn. Conversely, if the expectation is met, we might experience a modest uptick, bolstered by a sense of stability and continuity in India’s long-term vision.
Many funds are currently sitting out, waiting for the election results. Should the current government remain in power, these funds might decide to invest, which could provide a market boost. However, a deviation from expectations could lead to significant market volatility. There are funds, both domestic and overseas, waiting for June 4th’s confirmation before injecting new money into the market. Thus, many potential scenarios could unfold.
Market Outlook
Today, Nifty was quite flat, gaining just 23 points, after a couple of down days. We are near short-term oversold levels, but in an event-driven market like this, oversold conditions might not provide much cushion against potential drops. Significant risks remain in the short term, and equity investments carry inherent volatility. It’s crucial to hedge assets, incorporating gold and non-equity investments into your portfolio to mitigate short-term risks.
Nifty Next 50
Benchmark indices showed mixed performance. The Nifty Next 50 indicated some recovery with a shallow decline, and its RSI is rising.
Nifty Mid and Small Cap
Midcaps closed in the green with a modest quarter-percent gain, and small caps were flat but didn’t lose ground, indicating a lack of excessive nervousness.
Nifty Bank Overview
The Bank Nifty index also remained flat with a minimal gain, signaling market indecisiveness ahead of the elections.
Gold Chart
Gold prices were stable, and any unexpected election result could significantly impact the INR, potentially driving it to levels like 87-90 in the short term, thereby providing a hedge through gold.
FIIs & DIIs
FIIs have been net sellers in recent sessions, offloading significant amounts, while DIIs have matched these purchases, maintaining market stability. A more positive FII flow would have bolstered confidence, but this hasn’t materialized yet.
Nifty Heatmap
The heat map today showed a mixed bag, with Adani stocks performing exceptionally well. Public sector enterprise stocks also moved up, while IT, FMCG, and pharma stocks declined. Autos had a mixed performance, and banking and finance stocks showed some strength. In the Nifty Next 50, optimism was evident with several stocks in the green, including DLF, Chola Finance, Canara Bank, Havells, and others. Conversely, retail and some utility stocks saw a sell-off.
Sectoral Overview
Sectoral trends highlighted real estate and metals as leaders, continuing their strong performance over the past twelve months. Real estate was up 112%, metals 65%, PSU banks 83%, and public sector enterprise stocks 119%. These sectors are poised to lead any rally resurgence. However, pharma and IT sectors showed losses, indicating the market is in a risk-on mode, sensing potential positive outcomes.
Sectors of the Day
Nifty IT Index
The IT index broke down from a flag-like formation, suggesting caution for large-cap IT stocks unless supported by strong setups.
Nifty Metal Index
The metals index showed resilience, and real estate remained robust, nearing all-time highs.
Nifty REALTY Index
Stocks of the Day
Adani Power
Adani Power was the stock of the day, surging significantly in recent sessions, reflecting market expectations tied to the election outcome. It broke out from a mini flag formation, moving from 700 to nearly 750, driven by speculation of continued government support.
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