Indian shares hit record highs, the rupee gained strength, and bond yields dropped in early trading on Monday. This comes after exit polls indicated a likely third term for Prime Minister Narendra Modi, with investors anticipating continued public spending to sustain economic momentum.
The Nifty 50 index soared by 3.59% to an all-time high of 23,338.70 points, while the BSE index jumped by 3.76% to a peak of 76,738.89 points. This marked the Nifty 50’s best intraday gain since February 1, 2021. Additionally, the benchmark 10-year government bond yield fell to 6.9421%, its lowest since April 2022, dropping four basis points from its previous close. The rupee also strengthened to 82.9575 against the US dollar, its highest level since March.
Exit Polls Predicting a Strong Win
Weekend exit polls forecast that Modi’s Bharatiya Janata Party (BJP) led alliance would secure more than 303 seats in the 543-member lower house, potentially achieving a two-thirds majority. This outcome would provide the government with the leverage needed to implement constitutional amendments.
A substantial victory for Modi had been anticipated, but the projected margin exceeded analysts’ expectations, signaling positive sentiment for equity markets buoyed by economic growth. Rajesh Bhatia, Chief Investment Officer at ITI Mutual Fund, noted that the markets are optimistic about the continuation of the current government’s economic policies, which include significant capital expenditure and production-linked incentives.
Economic Indicators and Future Policies
India’s economic growth surged to 8.2% in the fiscal year ending March 2024, driven by government infrastructure spending and a real estate boom. Analysts suggest that if Modi’s victory is as decisive as exit polls predict, he would have the political mandate to pursue more ambitious reforms, such as land and labor regulations.
Market Analysts and Potential Beneficiaries
Citi analysts stated that a victory for Modi would signify a vote for policy continuity, benefiting sectors like infrastructure, logistics, and manufacturing. They highlighted companies such as Adani Ports, Larson & Toubro, and Bharat Electronics as potential winners.
Foreign investors, who invested a net $20.7 billion in Indian equities last year but withdrew ahead of the election, might return to the market following the election results. Goldman Sachs analysts pointed out that political stability is crucial for a steady macroeconomic environment and ongoing reforms.
While exit polls suggest a comfortable win for Modi, their accuracy has been inconsistent in the past. The final results of the general election, which involved over a billion eligible voters, will be announced on Tuesday.
Sunil Nyati, Managing Director at Swastika Investment, emphasized that if the BJP’s win is as strong as projected, the current market rally is likely to continue, particularly benefiting large-cap stocks as foreign investors resume buying Indian equities.
