India Futures Jump With Rupee as Exit Polls Show Modi Win

Indian stock-index futures advanced and rupee forwards strengthened after exit polls showed the main opposition alliance led by Narendra Modi probably won the most seats in national parliamentary elections.

SGX CNX Nifty (NIFTY) Index futures expiring this month increased 1.2 percent to 7,124 at 9:10 a.m. in Singapore, while one-month non-deliverable forwards on the rupee gained 0.5 percent. The CNX Nifty climbed 2.3 percent to a record 7,014.25 and the rupee touched a nine-month high before the poll results yesterday.

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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 Nifty has outperformed equity indexes in Brazil, Russia and China this year as investors bet a Modi-led government will do more to revive an economy growing at near the weakest pace in a decade. Results will be announced May 16.

“The Nifty may rally 5 percent this week if the exit polls show the BJP-led alliance getting close to 272 seats,” U.R. Bhat, a managing director at the India unit of U.K.-based Dalton Strategic Partnership LLP, said by phone from Mumbai.

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American depositary receipts of ICICI Bank Ltd. added 2.4 percent and Tata Motors Ltd. gained 5.4 percent in New York trading. The Bank of New York Mellon India ADR Index climbed 2.8 percent to the highest level since July 2011.

The nation’s benchmark S&P BSE Sensex index has risen 19 percent since Sept. 13, when the BJP named Modi as its candidate for prime minister, while the rupee has gained 5.7 percent. Global investors plowed more than $ 10 billion into local equities and bonds this year.

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Fund Inflows

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. Rakesh Arora, head of research at Macquarie Group Ltd. in Mumbai and the most accurate forecaster for the Sensex in 2013, said in a Bloomberg News survey last month that his year-end Sensex target of 23,900, 1.5 percent above yesterday’s close, may prove conservative if Modi comes to power.

In the last two elections, exit polls overestimated the strength of the BJP, by about 30 seats in 2009 and as many as 70 seats in 2004. Congress’s surprise win to take power in 2004 led to the biggest one-day equity retreat in more than four years, while the party’s victory in 2009 lifted the Sensex by a record 17 percent.

‘Bigger Mandate’

India’s economy expanded 4.9 percent during the fiscal year ended in March, close to the decade-low growth of 4.5 percent in the previous year, according to Statistics Ministry estimates. Projects worth $ 230 billion are awaiting clearance as lawmaking stalled in Prime Minister Manmohan Singh’s coalition government, data from the Cabinet Committee on Investment show.

“The base case scenario based on the exit polls is 290 seats for the BJP-led alliance, and if that happens, the new government will get a bigger mandate to implement reforms,” Deven Choksey, managing director of Mumbai-based KR Choksey Shares & Securities Ltd., said by phone. “Stocks will trade at a premium to current valuation in the coming days.”

The Sensex is valued at 14.6 times its projected 12-month profits, equal to the average multiple over the past five years, according to data compiled by Bloomberg.

Proponents see Modi, who oversaw annual economic growth of 10 percent as the head of Gujarat state since 2001, as a leader who can speed up infrastructure projects, while opponents blame him for 2002 riots that killed about 1,000 people, mostly Muslims. Modi rejects accusations of any wrongdoing.

Inflation Accelerates

The BJP leader improved access to electricity and eased investment approvals after taking power in Gujarat, providing a growth platform for companies in the state such as Adani Enterprises Ltd. (ADE) Adani’s shares have tripled since Sept. 13.

Nine rounds of voting started on April 7 to pick 543 seats in the world’s second-most populous country. Turnout averaged a record 66.4 percent, the Election Commission of India said, compared with 58 percent in the 2009 election and the previous high of 64 percent in the 1984 vote.

India’s retail inflation accelerated by the fastest pace in three months while factory output declined, adding pressure on the central bank to keep rates elevated after the election.

The consumer-price index rose 8.59 percent from a year earlier, compared with 8.31 percent in March, the Central Statistics Office said in New Delhi yesterday. The median of 39 estimates in a Bloomberg survey predicted an 8.5 percent rise. Industrial production shrank 0.5 percent in March, a separate report showed, compared with an estimated 1.5 percent drop.

To contact the reporters on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net; Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net

To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Phani Varahabhotla

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