Bengaluru: Indian shares swung between gains and losses in early trading on Wednesday, as investors digested a narrow win for Prime Minister Narendra Modi’s alliance and awaited more updates on the new government’s formation.
The NSE Nifty 50 index was up 0.3% at 21,941 points as of 09:46 a.m. IST, and the S&P BSE Sensex was up 0.2% at 72,227. The indexes fell 0.42 and 0.26% earlier in the session.
Modi’s Bharatiya Janata Party lost its outright majority in parliament in a surprise election verdict.
The benchmarks closed nearly 6% lower each on Tuesday.
“The markets will remain choppy till the government is finally formed and key portfolios are allocated,” said Neeraj Dewan, director at brokerage Quantum Securities.
Foreign institutional investors (FIIs) sold a record 124.36 billion rupees (about $1.5 billion) worth of Indian shares on Tuesday, provisional data from the National Stock Exchange showed.
Until we have an idea about the policies of the new government, we may see some sector rotations, with defensive sectors like information technology and consumer goods doing better, Dewan said.
Consumer goods stocks rose 3% and IT stocks were up 1%, leading sectoral gainers.
Meanwhile, state-run companies and state-run banks extended losses from Tuesday and were down about 2.5% each, as analysts said reforms like divestment in these companies could face a strong opposition.
The sub-indexes plunged 16% and 15% respectively in the previous session.
Analysts see public sector companies, state-run banks, defence, infrastructure, capital goods coming under pressure due to uncertainties around reforms, but expect consumption-driven stocks doing well on expectations of good monsoons.
Some analysts also said a fall in Indian equities could present an opportunity to buy stocks.
“Broad policy continuity, macroeconomic resilience and strong growth fundamentals should keep relative appeal for Indian equities intact,” Goldman Sachs said in a note.
“We also expect foreign flows to return, given this event risk is behind us now, especially in the light of weak flows so far this year and multi-year low foreign positioning,” Goldman said.
(Reporting by Sethuraman NR in Bengaluru; Editing by Varun H K)
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