Equity futures and currency forwards climbed on Monday after Prime Minister Narender Modi led coalition governmentis poised to retain power.
SGX Nifty 50 Index futures rallied as much as 2.6% as exit polls predicted a majority for the Bharatiya Janata Party and its allies after the nation’s six-week-long general election ended Sunday. One-month offshore non-deliverable rupee forwards jumped as much as 2.3% to 69.10 per dollar.
The forecasts come when the optimistic tone for the nation’s assets has waned in the wake of the US-China trade standoff and concern about Modi’s ability to repeat his landslide 2014 win amid a resurgent opposition, farm distress and a job crisis. Investors had been worried that an outcome that defies the market’s base case view -- the BJP-led alliance winning with a slim majority -- could lead to an adverse reaction.
“Exit poll results will put to rest any concerns about the present government not coming back,” said Paresh Nayar, Mumbai-based head of currency and money markets at FirstRand Ltd. “Financial markets are going to cheer these exit poll results.”
The rupee, Asia’s top performer in March, has slid 1.6% this quarter as escalating trade tensions roiled global markets. The yield on benchmark 2029 bonds fell five basis points last week to 7.36%, while the S&P BSE Sensex gauge of stocks recovered from a nine-session losing streak to cap the best week since March.
Sentiment has been fragile as overseas investors have pulled more than $650 million combined from local shares and bonds this month. Also, Indian exit polls have often gotten things wrong: they wrongly estimated the BJP would win re-election in 2004 and significantly underestimated the scale of the main opposition Congress-led coalition victory in 2009. Votes will be counted Thursday.
India’s currency begins trading in the spot market at 9 am in Mumbai, while equity indexes will start trading at 9:15 am.
