Equity futures and currency forwards climbed on Monday after exit polls signalled Prime Minister Narendra Modi’s ruling coalition is 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.