India’s main opposition bloc led byNarendra Modi is poised to win a majority in a national election, most exit polls signaled, boosting his chances of taking power in the world’s second-most populous country.
Modi’s Bharatiya Janata Party and its allies will win 249 to 340 seats, according to six exit polls today, with 272 needed for a majority. TheCongress party and its allies, in power for the past decade, are projected to win 70 to 148 seats. Results will be announced on May 16.
“Let’s place people over politics, hope over despair, healing over hurting, inclusion over exclusion and development over divisiveness,” Modi, 63, said in a statement sent by the BJP today. “It is natural for the spirit of bi-partisanship to get temporarily lost in the midst of an election campaign, but now is the time to regain it.”
The polls, which have overestimated the BJP’s strength in the past two national elections, could further boost Indian stocks and the rupee as investors bet that Modi will revive growth in Asia’s third-biggest economy. The tally indicates the best-ever performance for the bloc led by the BJP, a party rooted in Hindu nationalism that has pledged to reduce one of Asia’s fastest inflation rates and expedite foreign investment.
“If the BJP and allies win more than 220 seats then Modi will be India’s next prime minister,” said A.K. Verma, a political analyst at Christ Church College in Kanpur in Uttar Pradesh, India’s most-populous state. In the 2009 election, the Congress alliance won 260 seats and the BJP group took 160.
The BJP and its allies are forecast to win 289 seats, compared with 101 for the Congress group, Bloomberg TV India reported, citing a Cvoter exit poll. The BJP bloc would win 261 to 283 seats, according to an India Today exit poll, while the Congress-led alliance would win 110 to 120 seats.
Governance is Everything
I have been invested in India since 2003 but I almost cashed out last year because the government was not only incapable of dealing with economic deterioration but was also an instrumental cause of these problems. Fortunately, I held on when it looked as if Narendra Modi would run in the election just completed today. Now, the key question to be answered on Friday will be the size of the BJP and its allies’ victory.
India (weekly & daily) has been a star performer since early February and has surged over the last two days on a growing belief that Modi will win with an overall majority, following a contentious election during which opposition parties attempted to dent his momentum. They appear to have failed but Modi and his allies require 272 seats for an overall majority, which would be a significant achievement in a country with many, mostly smaller parties. It would also ensure strong, economically savvy governance, which is exactly what India needs.
I have participated in India via the JPMorgan Indian Investment Trust (JII LN) (weekly & daily), which has seen its discount to NAV contract from minus 14% to minus 11% today, and should narrow further as India’s stock market appreciates. JII’s underperformance since 2011 is mainly due the strength of UK sterling versus the Indian rupee (GBP/INR) (weekly & daily) since 2Q 2010, although before that I had benefited somewhat from sterling’s earlier weakness. The rupee’s weak spell since 2010 contributed to India’s inflationary problem.
India’s capable new Governor of the Reserve Bank of India, Raghuram Rajan, stemmed the rupee’s slide and should have some success in taming inflation over the next few months, provided he says on. During the election, a few people within the BJP said Rajan should be replaced, largely because he raised interest rates to fight inflation. Presumably only Modi and India’s next Finance Minister could make that decision but I think it would be wiser to back Rajan.
To see other Indian funds and ITs, see the Chart Library’s ‘Asia & Asia Pacific – Funds ITs & ETFs’.
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