Exuberance seems to have set in for Indian equities if one looks at the SGX Nifty, where foreign institutional investors take positions.

As the Bharatiya Janata Party scored handsome wins in this round of Assembly elections, the SGX Nifty touched 6,500 points, a gain of 2.85 per cent over the previous day’s close.

Foriegn institutional investors are already betting on the BJP-led National Democratic Alliance (NDA) in the general elections next year.

“The election results were better than forecasted by the exit polls. The equity markets will respond very positively as investors will likely read this as a win for the NDA in June general elections,’’ said Gautam Trivedi, Managing Director & Head of Equities, Religare Capital Markets Ltd.

Sensex may touch 22K

According to an average of 10 analysts’ estimates compiled by Bloomberg, the S&P BSE Sensex will climb to almost 22,200 by the year-end if the BJP comes to power in four of the five states that went to the polls recently.

The fact that the Congress got only 30 per cent of the vote — their worst performance ever — suggests that voters are clearly voting for a change.

“Inflation, corruption and lack of job creation are the main issues. The question is that with six months to go for the general elections what steps will the UPA now take. There is concern that if they resort to large-scale spending then the fiscal will go out of whack,’’ Trivedi added.

Reform-oriented, industry-friendly

The possibility of a BJP-led Government in the Centre has boosted the market sentiment as Narendra Modi and the BJP-led NDA are considered to be more reform-oriented and industry-friendly than the current Congress-led United Progressive Alliance.

Investment bankers such as Goldman Sachs, UBS, Credit Suisse, Nomura and Bank of America Merrill Lynch have also been vocal about a BJP-win drastically improving the outlook for the Indian stock market.

However, some analysts are cautioning the market participants, as they believe that the impact of the BJP’s decisive victory in Madhya Pradesh, Rajasthan, and Chhattisgarh on the market could fizzle out after the first few trading sessions, as other events catch attention.

Spectacular debut of AAP

According to Dinesh Thakkar of Angel Broking, the electorate has conveyed an unambiguous disapproval of the Central Government with a nuanced message for the main Opposition party, the BJP, that it cannot hope to automatically take advantage of the anti-incumbency of the UPA as evidenced by the spectacular debut of AAP, a political outsider in the city state of Delhi.

“An anti-UPA mandate in 280 seats in which the BJP has inadequate representation would be cornered by the regional parties in 2014. Regional parties would emerge stronger in 2014 as the Congress’ loss from its previous high of 206 would mainly benefit them. Voters seek a credible alternative to UPA even if it means voting for a strong regional outfit that can win. Markets would do well to take note of it,” he said.

Meanwhile, most of the Asian markets are trading in the positive region on Monday.