Expectedly, after the resounding victory by the Congress Party in the general elections, markets skyrocketed as soon as the opening bell was sounded; eyeing a windfall in terms of government spending in a host of sectors to pump-prime the economy.
The sentiment was so strong in the trading community and the going was so good on the BSE Sensex that it reached the 17.24 per cent gain mark in no time, forcing the authorities to temporarily halt trading, when the circuit breaker* kicked in.
The same story repeated itself on the National Stock Exchange where the trading was also halted with the Nifty up by 17.33 per cent.
Within seconds of trading, the Bombay Stock Exchange’s benchmark Sensex vaulted 2,110.79 points, or 17.3 percent, to 14,284.21, triggering the historic shutdown Monday. Infrastructure, banking and real estate companies led gains. Trade was forced to close for the day, after the Congress Party’s definitive victory in national elections set the scene for long-delayed economic reforms
“The big question – is it a game changer? Can India get back to the high growth, high valuation of recent years? This event probably does open up meaningful possibilities, but there’s a lot to do, and there could be a lot in the way,” she said in a report.
Trading has never before been halted due to an upward swing in stock prices, according to the Bombay Stock Exchange.
The last time trading circuit breakers, which are designed to temper wild market movements, were triggered was January 22, 2008, when the Sensex plunged on fears of a U.S. recession.
Investors, many of whom had been sitting on cash, welcomed the end to uncertainty’ predicts a long bull run for the market.
“Compared to other emerging markets, we had underperformed by 25 to 30 percent because politics in India were unstable,” he said. “Now that there is no event risk and there is a strong government, we will catch up.”
Despite the high sprits, even within India there are headwinds to change. Congress is unlikely to curtail costly social welfare programs which have added to the budget deficit.
The global financial crisis has already slowed the pace of some reform, as Indian authorities look with fresh skepticism on the wisdom of U.S.-style markets and regulation.