Indian Markets Rally on Modi Exit Poll Lead
May 20 2019 - 7:04AM
Dow Jones News
By Avantika Chilkoti
Indian markets cheered Monday as exit polls suggested Prime
Minister Narendra Modi is set for another five years at the helm of
Asia's third- largest economy.
The benchmark Sensex index rallied more than 3%, on pace for its
best day since November, while the rupee gained 1.1% on the U.S.
dollar.
David Cornell, fund manager at London-based India Capital Growth
Fund, which has around $145 million in assets, is cautious about
the results of the preliminary polls but says the Modi government
has succeeded in restructuring aspects of the Indian economy in a
way that has pleased investors.
"The electorate thinks Modi is the best person to help India to
catch up with its peers across Asia," he said.
Voting in the nation of 1.3 billion people continued for weeks
and early exit polls trickled out Sunday as the final ballots were
cast. The surveys, which have proven incorrect in the past, suggest
Mr. Modi's ruling Bharatiya Janata Party and its allies could take
over 300 of the 543 seats in India's lower house of Parliament. The
official count will be released Thursday.
Among the biggest winners on Monday were the country's private-
sectors lenders. Shares in Yes Bank and ICICI Bank rallied 8.4% and
5.3%, respectively. Meanwhile, global car maker Tata Motors, one of
the market's most liquid stocks, gained 5.6% and refining group,
Indian Oil Corporation, was up 5%.
The preliminary results come as global markets have turned
volatile on the back of rising trade tensions between the U.S. and
China. For some investors, the Modi government leaves India
positioned to gain if multinational businesses turn skittish about
their presence in China.
"It may start to look like quite a good alternative to a
mercantilist tiff between two of the largest economies in the
world," Mr. Cornell said.
Mr. Modi swept to power in 2014 pledging to revive growth and
fight corruption, following a decade of rule by the Indian National
Congress party. The stock market has risen sharply under his
tenure, even if his record has been mixed.
The benchmark Sensex index has gained over 95% since mid-May
2014, when Mr. Modi came to power. The S&P 500 has gained
around 50% over the same period.
His best-known policies include a new goods-and-services tax and
the decision to abruptly invalidate more than 85% of Indian
currency in circulation as part of a push against corruption. Both
policies suffered from chaotic introductions.
The Indian economy grew 6.6% in the final quarter of 2018
compared with the year earlier, the slowest pace in over a year and
down from 7% in the previous three-month period.
Some analysts were surprised by the extent of Mr. Modi's lead if
Sunday's exit polls are correct. A win would represent continuity
to markets, rather than a sign that major new reforms are
coming.
Mr. Modi's 2014 victory was "totally different," in that it
represented a change of parties, said Kunal Desai, a fund manager
at Mobius Capital Partners, which specializes in emerging
markets.
Mr. Modi's promises for a second term don't include any obvious
big- bang overhauls. They pledge support for India's population of
agricultural workers, increased infrastructure investment and more
youth jobs.
A key risk for investors is geopolitics. Analysts say voter
support for Mr. Modi stepped up after Indian warplanes bombed
Pakistan for the first time in almost five decades in February,
amid tensions between the nuclear-armed neighbors.
Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com
(END) Dow Jones Newswires
May 20, 2019 06:49 ET (10:49 GMT)
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