After rallying over 2 per cent each on Friday, stock benchmark indices Sensex and Nifty may look to gain further on Monday, following the Maharashtra election results.
Maharashtra elections, which were followed keenly, saw the BJP-led Maha Yuti leading with over 210 of the 288 assembly seats against 150-odd seats, as suggested by exit polls. Defying exit poll predictions though, the JMM seems to be on its way to form government in Jharkhand for the third time. Exit polls had predicted the BJP-led alliance to marginally fall short of majority.
The outcomes of the Maharashtra and Jharkhand elections are crucial triggers, especially Maharashtra where NDA witnessed one-sided victory, said Santosh Meena of Swastika Investmart. This is likely to boost bullish sentiment further, he said.
Meena noted that historically downtrends often culminate in panic days, and the Adani-triggered sell-off appears to have marked such a turning point. With markets oversold for nearly two series, a short-covering rally has emerged ahead of the November expiry.
"Nifty found strong support at 23,200, which aligns with the 61.8% retracement of its previous rally from the election-day low of 21,281 to the high of 26,277. The index reclaimed its 200-DMA with a bullish Harami candlestick formation, signaling a potential trend reversal. Immediate resistance is at the 20-DMA of 24,030, and a breakout above this level could push Nifty toward 24,550/25,000 levels," Meena said.
The stability in Maharashtra could trigger a rally in the stock market, boosting investor confidence, said Palka Arora Chopra, Director of Master Capital Services Ltd.
"In Maharashtra, the BJP-led Mahayuti alliance is poised to form the government. This result is expected to provide political stability, positively impacting investor sentiment, especially in infrastructure, urban development, and manufacturing sectors aligned with BJP policies," the analyst said.
"In Jharkhand, the JMM-led alliance’s expected return to power suggests continuity in social welfare policies. While this might not offer the same level of market enthusiasm as Maharashtra, the state’s ongoing focus on rural development, tribal welfare, and mining could provide investment opportunities in these areas. However, political stability in Jharkhand might not have the same immediate market impact as in Maharashtra," Arora added.
Overall, the political outcomes, particularly in Maharashtra, suggest a positive outlook for the Indian stock market, especially in sectors that benefit from infrastructure development and political stability, Arora said.
Meanwhile, global factors may keep posing significant risks for domestic stock. Escalating tensions between Russia and Ukraine, alongside rising crude oil prices, have added to inflationary concerns. Simultaneously, a strengthening dollar index and elevated US bond yields are weighing on the rupee, leading to record FPI outflows of Rs 1.55 lakh crore in October and November combined.
"FPI selling in India is likely to taper off soon. Also valuations of largecaps in India have come down from the elevated levels. FIIs have been buying IT stocks and this has been imparting resilience to IT stocks. Banking stocks have been resilient despite FII selling, mainly due to DII buying," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.