Brokers at the Bombay Stock Exchange
Brokers at the Bombay Stock Exchange. Market capitalisation has risen by over 6 per cent this year to over Rs 151 trillion. Image Credit: PTI

Mumbai: Indian shares rose to all-time highs on Tuesday, extending a four-day rally after exit polls on Sunday showed Prime Minister Narendra Modi was set to retain power with an even bigger mandate than in 2014.

The NSE index was up 0.44 per cent, after hitting a record 11,883.55, while the benchmark BSE index was up 0.53 per cebt, after hitting its highest at 39,571.73. Both the indexes saw their biggest single-day gain since September 2013 on Monday.

Adani Ports and Special Economic Zone Ltd. was up 2.7 per cent and was the top percentage gainer on the NSE index while Tata Motors Ltd slid 2.9 per cent after reporting a 47 per cent slump in March-quarter profit on Monday.

Meanwhile Bloomberg adds that a battered corner of India’s $2.1 trillion stock market - mid-cap shares - may be ready to shine after exit polls in India signaled a second term for Modi

While the benchmark Nifty 50 Index rallied 3.7 per cent to a fresh peak, the Nifty MidCap 100 Index advanced 4.1 per cent as the strength of the projected victory boosted the broader market. The outperformance may continue if Modi does indeed emerge victorious, analysts say.

“If actual results are close to what exit polls indicate, we expect beaten down mid- and small-cap stocks to take centrestage,” said Dharmesh Kant, head of retail research at Indianivesh Securities Ltd.. “The rally has the potential to throw up multi-baggers from the mid-cap segment.”

The Nifty MidCap gauge’s valuation is near the cheapest since 2012 relative to the main NSE Nifty 50 Index despite Monday’s surge. That signals potential for further gains in case of a favorable electoral verdict, according to brokerages including Angel Broking Ltd. and Kotak Securities Ltd.

Smaller companies stars of India’s market in 2017, bore the brunt of the sell-off that roiled India and other emerging nations last year. The Nifty midcap gauge closed 2018 with a loss of 15%, versus a 3.2% gain for the Nifty Index, as investors sought the safety of the biggest stocks amid headwinds from the trade conflict and rising oil prices. The mid-cap gauge remains modestly down for 2019, while the benchmark is at a new high.

“If we have the BJP-led coalition coming back to power then expect broader participation in the mid- and small-cap space as they are the most beaten down in the last 18 months,” Rusmik Oza, head of fundamental research at Kotak, said.

Domestic fund flows could return to action
A potential victory for Prime Minister Modi’s Bharatiya Janata Party-led alliance will also help bring back domestic fund flows, and that’s good news for mid-cap stocks.
Flows into local equity mutual funds in April were the smallest in 31 months as the anxiety about the outcome of the marathon election prompted investors to hold off on fresh purchases. Still, funds that invest in mid- and small-caps contributed to a bulk of the month’s inflow, the Association of Mutual Funds in India said earlier this month.