India shares at record high on exit polls

Narendra M odi

Narendra M odi

Indian stock markets have risen to a record high after exit polls suggested that Narendra Modi-led Bharatiya Janata Party (BJP) and its allies are on course to win the general election.

India’s main stock index, the Sensex, rose 1.7% to 23,941.32 points in early trade on Tuesday.

This follows a 2.4% gain on Monday ahead of the exit poll results.

Analysts said investors were hopeful that a win for BJP could help reverse the slowdown in India’s economy.

“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.

Analysis

Narendra Modi has campaigned on the economic record of his home state and presented himself as the pro-business candidate.

And as the momentum behind his campaign has grown, the country’s key stock market indices have risen sharply over the past few months – helped by foreign investors injecting over $5bn (£3bn) in to Indian companies.

Most exit polls released after the five-week election marathon came to an end have suggested Mr Modi would get a strong mandate

But some investors are cautious – not just because opinion polls have been wrong in previous elections – but also because big question marks remain over how much difference a new government can make at least in the short term to spur India’s economy which has been growing at it’s slowest pace in a decade.

“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.”

India’s economic growth has slowed in recent years, hurt by a range of factors.

One of the big criticisms of the previous government was that it delayed the implementation of key reforms, seen by many as key to long term growth.

Many had alleged that the Congress-led United Progressive Alliance (UPA) government bowed down to pressure from smaller regional allies over key issues.

Analysts said that a clear majority for the BJP and its allies in the latest elections could give the government the necessary support to take measures aimed at boosting growth and investment in the country.

“Investors are betting that BJP and its allies will get a majority mandate, which means they will not be constrained by the demands of smaller regional allies when it comes to implementing key reforms,” David Kuo, director at The Motley Fool a financial advisory firm, told the BBC.

“Given his success as the Chief Minister of Gujarat, Narendra Modi is widely seen as pro-investment and pro-business.

Categories: Asia, India

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