Benchmark indices ended higher in trade, as the BJP won a hard-fought victory in the Gujarat elections, which until some months was seen as a cakewalk.
The Sensex ended the day higher by 138 points, while the Nifty gained 55 points in trade.
At one stage in the morning, it looked like the BJP would lose Gujarat, which instantly saw a huge drop in the Sensex of almost 800 points.
A complete reversal in trend
However, by 3 pm it became clear that the BJP was set to form the government, with a clear majority. The party won and leading in 98 seats in the 182 seat assembly, which was less than what most exit polls had estimated. It was also way below their own target of 150 seats. However, the Sensex chose to ignore the same, as global cues were also very strong. The German DAX, French CAC and the UK's FTSE were all higher in trade which also helped the index.
Gujarat based company shares recover
Shares of companies based in Gujarat, which were down as much as 5 per cent in morning trade, saw sharp recoveries. Adani group stocks like Adani Ports and Adani Enterprises were both higher. Other names like Cadilla Healthcare, Gujarat Petronet LNG, GSFC all ended the day with gains.
Analysts, however warn that we may soon see some drop in the prices during the course of the week and hence profit booking is advisable in these companies.
Metal stocks among the top gainers
The high beta metal stocks were the top gainers in trade. Vedanta and Hindalco led the rally, with both stocks gaining 3-4 per cent each. However, stocks like Coal India, Tech Mahindra were among the losers.
Oil marketing company stocks were seeing losses with HPCL and BPCL both seeing a very subdued trend following a rally in crude prices.
Banking stocks also saw some smart buying with Yes Bank and IndusInd Bank among the gainers, after their inclusion into the Sensex.
A reaction in markets likely
The markets rallied largely on the back of strong global cues, even as the BJP was expected to do much better. Analysts say that there could be some selling pressure that could emerge in the coming days, on account of profit booking.
However, if global cues remain robust a further upside from current levels cannot be ruled out.