David Fuller's view -
Indian stocks advanced to all-time highs and the rupee strengthened after exit polls showed the main opposition alliance led by Narendra Modi probably won the most seats in national parliamentary elections.
Modi’s Bharatiya Janata Party and its allies probably won 249 to 340 seats, according to six exit polls, with 272 needed for a majority. The Sensex has outperformed stock indexes in Brazil, Russia and China in 2014 as investors bet a Modi-led government will revive an economy growing at near the weakest pace in a decade. Results will be announced May 16.
“A result north of 240 seats for Modi would likely deliver him the Prime Minister’s office and a host of willing coalition partners,” Jonathan Schiessl, an Asian equities specialist at Ashburton Investments, which manages $10 billion, said by e-mail today from Jersey in the Channel Islands. The exit-poll numbers are “staggering,” he said.
Energy companies, including Oil & Natural Gas Corp. (ONGC), and power-equipment maker Bharat Heavy Electricals Ltd. (BHEL) were among the top gainers on the Sensex amid speculation that a Modi-led government will ease control over state companies. The S&P BSE India PSU Index climbed to a 15-month high.
The Sensex index has risen 21 percent since Sept. 13, when the BJP named Modi as its candidate for prime minister, while the rupee has gained 6.2 percent. The rally may extend if the BJP and its allies secure more than 266 seats, according to a Bloomberg survey of 19 brokers and investment advisory firms published May 9.
Global investors have plowed $10.7 billion into Indian stocks and bonds this year. They bought a net $341 million of shares today, according to provisional data from the exchanges, the most since March 28. Inflows may continue on expectations of a stable government, Goldman Sachs Group Inc. said in a report today. JPMorgan Chase & Co. said it expects “market revelry” to continue as exit polls show a Modi-led alliance may be less reliant on the support of regional parties.
India is now open for business
This is a big story for the world’s largest democracy which has just completed the biggest election in history. The question for international investors today: Can India reverse its sad economic decline of recent years and regain the status of a successful developing economy?
Of course it can and that is what India’s electorate of approximately 800 million people have voted for.
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