The benchmark indices came off sharply from the day’s high after the government announced the portfolios of cabinet ministers on Friday. Many at Dalal Street were surprised by Prime Minister Narendra Modi’s decision to appoint Nirmala Sitharaman
as the next finance minister. She was the defence minister in first Modi government.
Ahead of the announcement, the Sensex and Nifty were trading at record levels above 40,000 and 12,000, respectively, amid excitement surrounding the finance berth. Around noon, the Sensex fell as much as 748 points from the day’s high on the back of sharp selling in index heavyweights.
Some said the sharp sell-off was due to “basket-selling” by investors.
The indices recovered lost ground to end with marginal losses. The Sensex lost 118 points, or 0.3 per cent, to close at 39,714.2, while the Nifty fell 23 points, or 0.2 per cent, to end the session at 11,923.
Bharatiya Janata Party (BJP) President Amit Shah was earlier tipped to become the finance minister by many in recent days.
“The allocation (of finance berth) has come as a surprise,” said Garima Kapoor, economist at Elara Capital. “After Jaitley, Sitharaman was the best bet for Modi as she has worked in the finance ministry, has domain knowledge being a post graduate in economics, and has also worked in the sector, thus ticking all the main boxes.”
Sitharaman takes charge at a time when the economic and corporate earnings growth has been sluggish.
Despite weak global markets, domestic stocks have rallied sharply over the past fortnight on hopes that the new government will take steps to spur growth. Since May 15, the Sensex has rallied 2,600 points, or 7 per cent, on the back of election-related euphoria.
“It is pretty evident from the rally in stocks and the bond market that it has enormous expectations from this government. However, one should align expectations with ground realities.