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India’s stocks surged to a record, while the rupee and sovereign bonds climbed after exit polls signalled an emphatic victory for Prime Minister Narendra Modi’s ruling party.
The NSE Nifty 50 Index rallied as much as 3.6 per cent, after most polls showed the Bharatiya Janata Party-led alliance securing a comfortable majority in general elections that concluded on Saturday. The rupee is the second-best performing currency in Asia on Monday (Jun 3).
Winning by a landslide would enable Modi’s party to push through policies that are seen as crucial by some investors for boosting India’s economic growth, already among the world’s fastest. The projected victory along with the recent upgrade of India’s ratings outlook by S&P Global Ratings may trigger a reversal of more than US$3 billion of withdrawals by global funds from local shares this year.
“Bets are the Sensex will outperform most Asian bourses and global equities as the hat-trick of macro, political and credit positives conspire to fuel fund flows,” Vishnu Varathan, chief economist Asia ex-Japan at Mizuho Bank said, referring to the BSE’S main equity gauge.
Monday’s rally is benefiting from short-covering by foreign investors, who are closing out their bearish wagers, analysts said. The Nifty traded 2.9 per cent higher at 23,178.90 at 1123 am local time. The votes will be counted on Tuesday (Jun 4).
“Foreign investors will need to cover short positions quickly,” said Abhay Agarwal, founder and chief investment officer at Piper Serica Advisors. “Margin calls on short positions may lead to the market spiking beyond 23,000 on Monday – a new high – and close to 23,500 on June 4th” if the final seat numbers for the ruling alliance are above 350, he said.
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The exit polls offered relief for investors after low voter turnouts and tight races in some states led to a jump in market volatility amid concern that the BJP might fall short of Modi’s 400-seat target.
The NSE’s India Volatility Index, a measure of 30-day implied swings based on options prices, nosedived as much as 22 per cent and was on pace to close at an over three-week low. The gauge had more than doubled from a low in late April.
S&P BSE 500 Index, among the most broader gauges in India, jumped as much as 3.9 per cent, its biggest intraday gain since February 2021, to an all-time high. The rally was led by shares of utilities companies that included state-run Power Grid and NTPC, the country’s biggest power generator.
Shares of other state-run companies and infrastructure-linked firms also rallied as a bigger mandate for Modi-led alliance means the government will likely extend its focus on pushing economic growth via capital spending. BSE’S gauge of state enterprises surged 7.1 per cent, while an index of capital goods firms added more than 6 per cent.
The stocks of companies controlled by corporates including the Adani Group and billionaire Mukesh Ambani were also among winners. All 10 shares of ports-to-power Adani conglomerate rallied, led by its power unit, which soared as much as 18 per cent. Reliance Industries, India’s most valuable firm, surged 4 per cent.
The benchmark 10-year bond pared some gains during trading, as investors look toward the poll results tomorrow and the Reserve Bank of India rate decision later this week. Yields fell as much as 4 basis points intraday to 6.94 per cent. BLOOMBERG
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