People walk past the Bombay Stock Exchange. The Sensex crossed 24,000 points for the first time during the intra-day trade in Mumbai yesterday.

Reuters/Mumbai

India’s benchmark BSE index rose yesterday to a third consecutive record high, surpassing the key psychological level of 24,000 points as stocks tied to the domestic economy surged after exit polls showed the Bharatiya

Janata Party and its allies winning a majority in the elections.

The BSE index rose as much as 2.2% to hit a life high of 24,068.94, while the broader NSE index rose as much as 2.3% to hit a record high of 7,172.35.

Narendra Modi is set to become India’s next prime minister when actual results are out on Friday, with his coalition broadly tipped to grab the 272 seats needed to clinch a majority, four major exit polls showed on Monday.

Still, exit polls by media organisations have proven unreliable in the past, while doubts have started emerging over whether markets have run ahead of fundamentals as election optimism overshadows issues like tepid earnings growth, fiscal deficit and sticky inflation.

“While the long-term uptrend remains intact, the market looks a bit stretched as it has discounted 260-270 seats for NDA now, so a rally would extend only if we get a positive surprise of say 300 seats,” said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance.

“The market had wind of exit polls’ results and therefore had run nearly 5% in two days before that.”

The BSE index ended up 1.36% at 23,871.23, while the NSE index ended 1.35% higher at 7,108.75, adding to their over 4% gains in the previous two sessions.

Shares of companies tied to the domestic economy led the gains. Bharat Heavy Electricals jumped 10.2%, while Oil and Natural Gas Corp Ltd rose 3.9%.

Larsen & Toubro rose 1.6%, while mortgage lender Housing Development Finance Corp ended 1.2% higher.

The NSE bank sub-index ended 0.6% higher after earlier hitting a record high at 14,367.75.

State Bank of India Ltd gained 1.5%, while Bank of Baroda rose 4.5%.

Among other domestic-oriented stocks, Ambuja Cements surged 4.8%, and Tata Power Co rose 3.7%.

However, Dr Reddy’s Laboratories, India’s second-largest drugmaker by sales, slumped 4.1% after its quarterly net profit fell short of analyst estimates due to a rise in expenses.

Rupee strengthens

The Indian rupee rose yesterday to its strongest close against the dollar in nearly 10 months as shares surged to record highs after exit polls showed opposition Bharatiya Janata Party and its allies clinching a majority in the country’s elections.

Markets have been already pricing in a win by the BJP, hoping that the coalition led by Narendra Modi would revive an economy growing at its slowest pace in a decade and attract more foreign investment.

However, broader gains were capped as the Reserve Bank of India remained an active buyer of dollars to curb the rupee’s rise, according to traders.

JP Morgan estimates that RBI interventions since February have totalled nearly $20bn, with an estimated $4.1bn in dollar purchases since the start of May, according to a note on yesterday.

“Markets have reacted positively to exit poll results, and in my opinion, unless there is a shock in the final results, the equity rally may continue, but INR may not gain substantially immediately,” said Paresh Nayar, head of fixed income and foreign exchange trading at First Rand Bank.