The benchmark stock market indices skyrocketed on Monday after exit polls predicted that Narendra Modi-led National Democratic Alliance (NDA) will comfortably manage a majority in the Lok Sabha elections and come back to power in 2019. At 3pm, the Sensex climbed 3.8%, or 1,450 points, to 39,380, while the Nifty 50 was up 3.7%, or 418 points, to 11,825. All sectoral indices were trading in the green, but the biggest beneficiary was the pack of public sector banks. The Nifty PSU Bank index was up over a whopping 7.9% in afternoon trade, while the Nifty Bank index was up nearly 4.5%.
Shares of State Bank of India (SBI) surged as much as 8.3% to Rs 345.80 on Monday, with over 44.65 million shares changing hands by afternoon. Other major gainers included Bank of India (up 9.5%), Bank of Baroda (up 9.2%), Allahabad Bank (up 8.8%), Canara Bank (up 8.1%), Syndicate Bank (up 8.5%) and Punjab National Bank (up 6.6%).
Shares of private banks also rallied, with the Nifty Private Bank index rising nearly 4%. IndusInd Bank was up 7%, Yes Bank climbed nearly 6%, ICICI Bank jumped 4.8%, while HDFC Bank and Kotak Mahindra Bank were up nearly 2.5% each.
According to analysts, the current BJP government has really helped public sector banks sort their mess with the help of the National Company Law Tribunal (NCLT) as well as by recapitalizing them. The fact that the BJP-led NDA is coming back to power fuels optimism that the sector recovery will continue. A new government and a change in policies would is currently seen as a big negative for PSU banks.
Moreover, market analysts expect that the worst is behind and most of the PSU banks should return to profitability during 2019-20 on the back of improvement in balance sheet.
Other rate-sensitive sectors also jumped. The Nifty Realty surged 5.5%, while Nifty Auto was up 4%.
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