Markets always have the tendency to surprise. The AAP is set to form the next government in New Delhi and has won the same with a super majority, which was practically unthinkable. The Aam Admi Party or the AAP is largely not considered a pro business or a pro corporate party, which is why logically the markets should have fallen. As we write the Sensex is up a huge 300 points.
Strong Macro Economic Data
The GDP numbers that came in yesterday were rather strong, despite the fact that they were revised advanced estimates. India's economy would in fact have grown faster than China making it the best in the world, if the advanced GDP estimate of 7.4 percent growth for fiscal year 2015 come true. Markets were completely buoyed by this data and saw solid buying.
Short Covering Rally
There was also a smart short covering rally say analysts. The markets had fallen for seven days in a row and investors found it a good opportunity to buy on dips. Banking stocks in particular saw a sharp rally on short covering. Stocks like State Bank of India and ICICI Bank saw a bounce.
Investors Betting On Lower Inflation
Investors are betting on lower inflation numbers due later this week. While retail inflation is expected around 5.4 per cent, the WPI inflation is expected to be flat. Optimistic inflation data saw some buying in trade.