Nifty hits record 9122.75 points, Sensex up after BJP's UP win

The NSE index rose as much as 2.1 per cent to a record high today as investors saw the Narendra Modi-led Bharatiya Janata Party's landslide victory in Uttar Pradesh as endorsing his economic agenda.

The BJP win strengthened Modi's claim to a second term in national elections in 2019, and investors are betting it will embolden the party to embark on more reforms including launching a national sales tax, or GST.

The benchmark BSE Sensex was up 1.6 per cent, while the broader Nifty rose as much as 2.1 per cent to a record high of 9,122.75 points in the first trading session since the election results were announced, surpassing its previous peak of 9,119.20 on 4 March 2015.

But the index then pared some gains and was up 1.5 per cent in afternoon trade. Indian markets were closed on Monday for Holi.

The benchmark 10-year bond yield fell 3 basis points to 6.87 per cent from its previous close, while the rupee strengthened to 66.2400/66.2425 from its 66.60/66.61 close on Friday.

The gains in the rupee prompted the Reserve Bank of India to intervene once it strengthened to around 66.16 per dollar, traders said.

Modi's victory "is a huge confidence boost for reform and is another step on the way to a story that could place him as one of the most successful reformers in history", Simon Quijano-Evans, investment strategist at Legal & General Investment Management in London, told Reuters.

Foreign investors have already started returning to the country, having bought a net $1.5 billion in equities and $887.3 million in debt in February, following four consecutive months of net sales. They have remained net buyers in March.

But expensive valuations and caution due to an anticipated rate hike by the US Federal Reserve this week could temper gains.

Indian shares are trading at a price-to-earnings ratio of 19.85 over the next 12 months, compared with their five-year historic average of 17.8, according to Thomson Reuters data.