The BSE Sensex closed higher on Tuesday, snapping a seven-day losing streak during which the 30-share blue chip index shed nearly 1,500 points or 5 per cent. Tuesday's trade was marked by extreme choppiness as the Sensex swung wildly in a 600-point band.
For many investors, the gain was surprising, coming on a day when the anti-corruption Aam Aadmi Party scored an unprecedented victory in Delhi elections. Analysts had linked the recent nervousness in stock markets to fears of an AAP victory in Delhi.
AAP's earlier policies have been termed as "anti-corporate" by analysts. In its earlier 49-day stint, AAP's Chief Minister Arvind Kejriwal had ordered the state auditor to look into the accounts of power distribution companies to see if they were profiteering in 2014; he had also threatened to cancel the licences of Delhi's two electricity distributors over power supply issues.
But, with poll results out of the way, investors seem to have shrugged off worries. Market expert Ajay Bagga said that people have digested the fact that there will be an AAP government for five years. "The news has got discounted; now, markets have started looking ahead," he said.
Traders seem to have set their sights on the upcoming Budget, which is expected to boost capital spending, offer tax breaks and usher in more reforms.
"AAP's win will not thwart the reform process. Market has started to discount the budget," said Nirakar Pradhan, chief investment officer at Future Generali India Life Insurance.
Top corporates from India Inc. also came out in support of AAP, saying a victory for the anti-corruption party augurs well for the country.
"A strong local government promising clean governance bodes well for ease of doing business in the territory. Hence market rebounding makes sense," tweeted Anand Mahindra, chairman of M&M.