Nifty, Sensex seen rallying on exit polls showing BJP-led majority

MUMBAI Mon May 12, 2014 11:04pm IST

People watch a large screen displaying India's benchmark share index on the facade of the Bombay Stock Exchange (BSE) building in Mumbai December 9, 2013. REUTERS/Mansi Thapliyal/Files

People watch a large screen displaying India's benchmark share index on the facade of the Bombay Stock Exchange (BSE) building in Mumbai December 9, 2013.

Credit: Reuters/Mansi Thapliyal/Files

Related Topics

Stocks

   
Border Security Force (BSF) soldiers ride their camels as they rehearse for the "Beating the Retreat" ceremony in New Delhi January 27, 2015. REUTERS/Ahmad Masood

"Beating The Retreat" Rehearsals

Rehearsals are on for "Beating the Retreat" ceremony which symbolises retreat after a day on the battlefield, and marks the official end of the Republic Day celebrations.  Slideshow 

MUMBAI (Reuters) - Indian shares are seen surging to a record high and the rupee and bonds could hit new multi-month highs when trading opens on Wednesday after exit polls showed Bharatiya Janata Party and its allies winning a majority in the country's elections.

The projections could especially benefit domestically-focused shares such as ICICI Bank ICBK.NS as the BJP-led coalition is widely seen as setting the stage for a revival in confidence, investment and growth in Asia's third-largest economy.

The Nifty has already surged 18.7 percent since Narendra Modi became the BJP prime minister candidate on Sept. 13. Foreign investors have been especially strong buyers into the rally, with a net $20.1 billion in purchases last year and about $4.3 billion so far in 2014.

The index surged 4.3 percent over Friday and Monday hitting record highs in each of the sessions. Gains in Indian-based assets in global markets surged after the exit polls, including the 1-month rupee and U.S.-listed shares of Indian banks such as ICICI Bannk IBN.N.

Still, analysts warn against exuberance as exit polls by media organisations have proven unreliable in the past. The actual results for India's five-week long elections will be out on Friday.

"A lot of expectation-based flows have come through. Looking through the noise, if the base scenario (BJP majority) happens, two things change structurally - first, you get a pro-investment government and one that is focused on infrastructure," said Salman Ahmed, global fixed income strategist for Lombard Odier Investment Managers in London.

"A strong government that understands the need for infrastructure should be able to get reforms in place and put in place the conditions for long-term growth.

Four major exit polls for the general election forecast a victory for the opposition coalition with results ranging from 261 to 289 parliamentary seats.

BJP and its National Democratic Alliance would need to win 273 seats in the 545-seat parliament to clinch the most seats in the Lok Sabha, but analysts say even a number close to that would be seen as enough to lead to a stable government.

A win of above 240 seats could spur stock market gains of 15-20 percent over the next month, Macquarie had estimated in a report ahead of the exit polls.

Markets are already factoring in such a scenario. The Nifty gained as much as 2.35 percent to a record high of 7,020.05 points on Friday, surpassing its previous record high of 6,871.35 points hit on Friday.

The partially convertible rupee rose to as high as 59.51 per dollar, its strongest since July 29, while the benchmark 10-year bond yield fell as 4 basis points to 8.71 percent, a level last seen on March 13.

"Infrastructure, engineering, cement, power and industrial stocks should gain if a Modi-led government comes to power," said UR Bhat, managing director, Dalton Capital Advisors,

"One should take exit polls with a pinch of salt, but people will latch on to them as they are the only information available ahead of actual results."

Domestic-oriented shares have led the rally, with the NSE bank sub-index hitting a record high. ICICI Bank Ltd ICBK.NS gained 2.2 percent, for a cumulative gain of 27.3 percent in 2014 compared to NSE index gain of 11.26 percent.

Infrastructure shares also gained, on hopes a Modi government would revive investments. Ambuja Cements ABUJ.NS up 1.8 percent, while state-run power equipment maker Bharat Heavy Electricals Ltd BHEL.NS surged 2.1 percent.

(Editing by Anand Basu)

FILED UNDER:
Photo

After wave of QE, onus shifts to leaders to boost economy

DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.

Reuters Showcase

Vodafone Ruling

Vodafone Ruling

Government will not appeal Vodafone tax ruling   Full Article 

Indian Railways

Indian Railways

Private refiners compete with state firm to sell diesel to railways   Full Article 

Ranbaxy Results

Ranbaxy Results

Dec-quarter net loss widens on forex loss  Full Article 

Market Eye

Market Eye

Sensex, Nifty retreat from record highs on profit-taking.  Full Article 

Tech Talk

Tech Talk

Apple takes high road in China smartphone standoff with Xiaomi.  Full Article 

Business Strategy

Business Strategy

Uber scraps commissions for its New Delhi taxis.  Full Article 

Job Cuts

Job Cuts

Sony to cut 1,000 jobs in smartphone business - sources.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage