Sensex Set for Record Open as Exit Polls Forecast Narendra Modi's Victory

The BSE Sensex and the 50-share Nifty benchmark are likely to hit record highs for a third successive session on Tuesday after most exit polls projected a win for Narendra Modi-led National Democratic Alliance (NDA) in the elections concluded on Monday.

The BJP-led NDA is projected to win between 249 and 340 seats, according to six exit polls. It needs 273 seats for a simple majority. The BJP's own tally could be over 210-220 seats, the exit polls predicted. (Read more)

If the exit poll projections come true, India might be heading for a stable government under Mr Modi, something investors have been rooting for. The Sensex has added more than 1,200 points, while the Nifty is up by over 350 points, or 5 per cent, over the last two sessions. Markets may add another 1 per cent right at the start on Tuesday, according to futures trade on the Singapore Exchange.

"Anything between 235 to 240 will be viewed positive for NDA...anything above 240 will be extremely bullish... and I think if that were to happen there has not been a rally to that," Samir Arora of Helios Capital told NDTV on Monday.

Narendra Modi-led BJP is seen by markets as being more investor- and business-friendly. The Nifty has already surged 18.7 per cent since Mr Modi became the BJP prime minister candidate on September 13. A large part of gains have come on account of strong buying by foreign investors, who have purchased cash shares worth about $4.3 billion so far in 2014.

(Read: What triggered Sensex surge ahead of exit polls)

"A lot of expectation-based flows have come through. Looking through the noise, if the base scenario (BJP majority) happens, two things change structurally - first, you get a pro-investment government and one that is focused on infrastructure," said Salman Ahmed, global fixed income strategist for Lombard Odier Investment Managers in London.

Over the last two sessions, FIIs have bought shares worth around Rs 2,500 crore. Domestic institutional investors, who have been net sellers in markets so far, also turned buyers on Monday, although the quantum of buying was very small at Rs 90 crore.

Retail investors, however, should be cautious even though the consensus outlook on the Street seems to be bullish. That's because exit polls have got it horribly wrong in the past.

Any results that show BJP falling short of a majority could cause shares to plunge 8 to 10 per cent in one day, and up to 20 per cent in the aftermath, analysts say.

As of 06.45 a.m., Nifty futures traded 1 per cent higher at 7,111.50.

The Sensex ended up 2.42 per cent (or 556.77 points) at 23,551, while the Nifty ended 2.27 per cent higher (or 155.45 points) at 7,014.25 on Monday. (Read more)

(With inputs from Reuters)