The jump in BSE Sensex as well as NSE Nifty on Monday will be sustainable only if macroeconomic indicators improve and actual mandate is in line with exit polls, which have predicted a landslide victory for Narendra Modi-led National Democratic Alliance, believe experts.
"Whatever mood emanates from actual set of (poll result) numbers, in my view, is not going to set the trend for the market as the underlying economic fundamentals have consistently kept weakening over the last several months. They have reached a point where some fresh thinking is required to revive the economy," Shankar Sharma, Co-Founder and Chief Global Strategist, First Global, told Business Today.
On Monday, Sensex closed at 39,352, up 1421.90 points (3.75 per cent) and Nifty closed at 11,832.70, up 425.55 points or 3.73 per cent.
"It is possible to sustain this rally only if there is political stability. However, if the actual mandate is different from exit polls, then we can go back to Rs 145 lakh crore (market capitalisation) immediately," says G Chokkalingam, Founder, Equinomics Research and Advisory.
The total market capitalisation of all the BSE-listed firms soared to a record high of around Rs 159 lakh crore in August 2018. "We are still down Rs 7.5 lakh crore from that high while another Rs 8 to 9 lakh crore was incrementally added by just 15 index stocks. The remaining stocks are still down and an erosion of Rs 16 lakh crore is huge," he adds.
This rally, after a strong government comes at the Centre, will not sustain unless macro indicators turn positive. The major concerns are rising oil prices, poor corporate earnings and manufacturing sector growth hitting an eight-month low in April amid a challenging economic environment. "After stability comes (at the Centre), the focus will be on these factors," says Chokkalingam.
Sharma says companies, irrespective of their size, have been adversely impacted by the macroeconomic factors. "Now even large companies are giving poor outlook and I think we are looking at a serious problem on growth. I have never seen such a pessimistic outlook. The year 2008 was bad due to Lehman, but right now there is no major dislocation," he adds.