Euphoric about poll results,Dalal St set for massive rally

The election results have pleasantly surprised market participants. People of India have given their verdict for a stable government and against policies of the Left. UPA at close to 260,will be in a much better bargaining position. In the last five years,as the Congress was playing a survival game,they could not do much with reforms and policy decisions such as FDI in insurance,retail,banking reforms,etc. Now,expectations are high. The market will be euphoric and may open about 10 per cent higher, said India Infoline chairman Nirmal Jain.

But dealers warn that one has to be cautious,but this may possibly be a beginning of another bull market. There will be opportunities to invest. Once the euphoria is over,one has to be cautious about negative cues from global markets,oversupply of papers and swelling fiscal deficits, Jain added.

Indications are that formation of stable government will trigger flow of foreign capital in equity as well as debt. This would mean appreciation of the rupee and revival of liquidity starved sectors like real estate and infrastructure. Government should now bring down high fiscal deficit,interest rates and push GDP growth back up to the 9 per cent-level,analysts said.

With Manmohan Singh,the prime architect of Indias economic reforms,once more set to become the Prime Minister without having to depend on the Left parties,the market expects key economic reforms to now take off at a faster pace. This would give the market the much needed direction and visibility on the policy front,which was earlier delayed due to stiff opposition from Left parties,one of its key allies in the previous regime.

We think the decisive result is a big positive for markets,as it will lead to a stable government,remove months of uncertainty,and would allow the Congress the space to pursue reforms. We think pension,insurance,banking reforms and disinvestment may be back on the agenda, said Tushar Poddar of Goldman Sachs.

During the entire phase of the election process in the past month,the domestic equity market was highly volatile on concerns of a fractured verdict that could create instability. As such,a lot of global investors were waiting in the sidelines for getting a clear picture on the poll outcome.

Despite election uncertainties,the market has soared more than 50 per cent from a 2009 low in early March,as foreign funds pumped in about 1.5 billion in April and more than 1.8 billion in April. This has helped the main index rise 26 per cent this year after plunging by more than half in 2008. The Sensex rose 2.5 per cent during the last week,matching a 10-week winning streak between July and September 2006.

Sensing a UPA victory,stocks rose 2.5 per cent,or 300.51 points,to 12,173.42,on Friday. Now with a stable government about to be formed and reform measures very much on the agenda,the market expects more international investors who were waiting in the sidelines during the recent market upsurge to enter Indian markets.

Market expectations

amp;149; Faster reforms in various sectors like insurance,retail and financial sector

amp;149; More foreign investments in key areas,including the stock markets

amp;149; Government can function smoothly and effectively without any Left interference

amp;149; Disinvestment process will be kickstarted again

amp;149; Faster economic growth and steps to bring down interest rates and fiscal deficit