In the past week, amid the twists and turns of the Indian elections, as the curtains fell on Modi’s re-election, on Friday afternoon, the Indian stock indices Sensex and Nifty both surged over 2%. The SENSEX30 index recovered all losses incurred on the day of the election results announcement and hit a record high.
It’s worth mentioning that following the announcement of the election results, the atmosphere in the Indian stock market has gradually changed. Over the past year, mid-cap and small-cap stocks were favored, and these small-cap stocks have often acted as indicators of market sentiment, often breaking traditional valuation and technical indicators.
However, after the unexpected election results, investors’ focus has shifted back to large-cap stocks that were previously overlooked. Fast-moving consumer goods giant Hindustan Unilever, motorcycle manufacturer Hero MotoCorp, and HDFC Bank have performed well this week, and traders expect this trend to continue.
Additionally, the Reserve Bank of India (RBI) announced its latest interest rate decision today, maintaining the interest rate at 6.5%. The RBI Governor held the first press conference after the election results, and the market is particularly interested in any potential changes in the central bank’s monetary policy stance.
Despite the growing global rate-cutting trend and the recent rate cut by the ECB, economists generally expect the RBI to refrain from following suit for now and wait for action from the Federal Reserve. The central bank had earlier transferred substantial dividend payouts to the government, coupled with robust monsoon expectations, easing inflation, and leading global economic growth prospects, suggesting that the new government currently faces no major fiscal concerns.
The market’s focus is now on the new government’s policy agenda and direction, which will determine future investment deployments. Looking ahead, inflation, economic growth, and monetary policy remain the most critical variables affecting the Indian market.
