(Bloomberg) — Stock futures in India rose after exit polls showed a resounding victory for Prime Minister Narendra Modi’s ruling party in the general election that concluded Saturday.
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The June contracts on the benchmark Nifty 50 Index rose nearly 3% in early trade on Monday, an all-time high for the contract launched in July 2023 on the Gujarat International Finance Tec-City. That is after most pollsters had predicted the Bharatiya Janata Party-led alliance. to obtain a total of between 350 and 400 seats. The estimates are substantially higher than the number of 272 needed for a majority in the 543-seat House of Commons. The votes will be counted on Tuesday.
A landslide victory for Modi’s party would allow the country to implement policies crucial to boosting India’s economic growth, which is already among the fastest in the world. That is seen as renewing foreign investors’ enthusiasm for the $4.7 trillion US stock market and strengthening the appeal of local companies. The exit polls provide relief for investors after low turnout and tight races in some states led to a jump in market volatility, amid concerns that the BJP could fall far short of Modi’s ambitious target of 400 seats.
“The prospect of unhindered functioning of Parliament during the third term under the Modi government is expected to bring many progressive reforms in India,” said Deven Choksey, Managing Director of DRChoksey FinServ Pvt. in Mumbai “The market is and will be enthusiastic because the reforms will deliver predictable earnings growth for India Inc., which will attract dollar inflows.”
Offshore Indian rupee non-deliverable forwards rose as much as 0.4% on Monday, while government bonds were also expected to rise.
While the final results may differ from the exit polls, the strength of the expected win is expected to benefit the risk assets. Indian shares hit a record in May, while bond markets neared their highest level in about a year.
Read more: India’s stock rally depends on Modi improving 303 seat tally
Should the results on June 4 be in line with the exit polls, analysts expect the NSE Nifty 50 Index to reach a new all-time high. The indicator fell by almost 2% last week, as foreign investors cautiously anticipated the election outcome.
“Foreign investors will need to cover short positions quickly,” said Abhay Agarwal, founder and chief investment officer at Piper Serica Advisors. “Margin calls on short positions could see the market rise above 23,000 on Monday – a new high – and close to 23,500 on June 4” if figures for the ruling alliance rise above 350, he said.
Stocks to watch
Shares of state-owned, infrastructure-linked companies and those of some companies including Adani Group and Mukesh Ambani’s conglomerate could be in focus on Monday. About 90% of the 54 stocks that CLSA called ‘Modi stocks’ in its May 29 note have beaten the Nifty index in the last six months.
These companies are believed to be benefiting from the BJP’s pro-growth policies and their outperformance could increase in case of a strong election outcome, the note said. Technology giant Larsen & Toubro Ltd. and the power producers NTPC Ltd. and NHPC Ltd. are among CLSA’s preferred shares.
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“There is a cyclical uptick in private capital investment, and in addition, political stability ensures we continue to like capital investment (real estate, industrial, energy) from a long-term perspective,” wrote strategists at Jefferies Financial Group Inc., including Mahesh Nandurkar . in a note dated June 2.
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