(Bloomberg) — In India, exit polls showing a landslide victory for Prime Minister Narendra Modi’s ruling party sent a wave of enthusiasm across markets, sending stocks soaring to record highs and boosting the rupee and government bonds.
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The NSE Nifty 50 index rose 3.6% after most polls showed the Bharatiya Janata Party-led coalition won a comfortable majority of 350-400 seats in general elections that ended on Saturday, well above the 272 seats needed to form the next government. The rupee rose to its highest in more than a year against the dollar and 10-year bonds rose modestly.
A landslide victory would allow Modi’s party to push through policies crucial to accelerating economic growth in what is already the world’s fastest-growing economy. An expected victory could also reignite foreign investor enthusiasm for India’s $4.7 trillion stock market, which briefly overtook Hong Kong this year to become the world’s fourth-largest.
“The prospect of a smooth running of Parliament in Modi’s third term is expected to bring about a lot of progressive reforms in India,” said Deven Choksey, managing director at Mumbai-based DR Choksey FinServ Pvt. “The market is excited and will continue to be excited as the reforms will bring expected profit growth for Indian companies, attracting dollar inflows.”
While the final outcome may differ from the exit polls, the strength of the projected victory is expected to favor risk assets. The votes will be counted on Tuesday.
Read more: India’s stock market rally hinges on Modi’s 303-seat victory
Analysts said Monday’s rally was benefiting from short-covering by foreign investors looking to exit bearish bets.As of 9:24 a.m. local time, the Nifty was trading 2.5% higher at 23,090.1.
“Foreign investors need to unwind their short positions urgently,” said Abhay Agarwal, founder and chief investment officer at Piper Celica Advisors. “If margin calls on short positions push the ruling coalition’s shares above 350, it could take the stock past 23,000 on Monday to a record high and approach 23,500 by June 4,” he said.
–With assistance from Subhadip Sircar and Ashutosh Joshi.
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