Indian stocks advanced to all-time highs and the rupee strengthened after exit polls showed the main opposition alliance led by Narendra Modi probably won the most seats in national parliamentary elections.
The S&P BSE Sensex added 1.4 percent to a record 23,871.23 at the close in Mumbai. The rupee climbed 0.6 percent, the most since April 25, to 59.67 per dollar, reducing some of its early gains as traders said the central bank probably intervened. India VIX, a measure of the cost to protect against swings in the nation’s stock market, sank 14 percent, the most since December.
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 Sensex has outperformed stock indexes in Brazil, Russia and China in 2014 as investors bet a Modi-led government will revive an economy growing at near the weakest pace in a decade. Results will be announced May 16.
“A result north of 240 seats for Modi would likely deliver him the Prime Minister’s office and a host of willing coalition partners,” Jonathan Schiessl, an Asian equities specialist at Ashburton Investments, which manages $10 billion, said by e-mail today from Jersey in the Channel Islands. The exit-poll numbers are “staggering,” he said.
Energy companies, including Oil & Natural Gas Corp., and power-equipment maker Bharat Heavy Electricals Ltd. were among the top gainers on the Sensex amid speculation that a Modi-led government will ease control over state companies. The S&P BSE India PSU Index climbed to a 15-month high.
The Sensex index has risen 21 percent since Sept. 13, when the BJP named Modi as its candidate for prime minister, while the rupee has gained 6.2 percent. 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.
Global investors have plowed $10.7 billion into Indian stocks and bonds this year. They bought a net $341 million of shares today, according to provisional data from the exchanges, the most since March 28. Inflows may continue on expectations of a stable government, Goldman Sachs Group Inc. said in a report today. JPMorgan Chase & Co. said it expects “market revelry” to continue as exit polls show a Modi-led alliance may be less reliant on the support of regional parties.
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 boosted the Sensex by a record 17 percent.
India’s economy grew 4.9 percent during the fiscal year ended in March, close to the decade-low growth of 4.5 percent in the previous year, the government estimates. Projects worth $230 billion are awaiting clearance as lawmaking stalled in Prime Minister Manmohan Singh’s coalition government, according to the Cabinet Committee on Investment.
“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 14.8 times its projected 12-month profits, breaching the average multiple over the past five years, data compiled by Bloomberg show.
Oil & Natural Gas rose to a record, sending a gauge of 10 energy stocks to its highest level since January 2011. Reliance Industries Ltd., owner of the world’s largest refining complex, climbed to its highest since April 2011.
Bharat Heavy surged 10 percent, the best performer on the Sensex today and its biggest gain in five years. Investors are buying the stock in expectation a strong government will be able to make policy changes in the power sector, boosting orders and output, Kim Eng Securities analyst Anubhav Gupta said in phone interview today.
GMR Infrastructure Ltd. leaped 9.7 percent, the most since Sept. 21, 2012. Adani Power Ltd. jumped 7.8 percent, extending this year’s gains to 37 percent. The S&P BSE India Power Index surged 3.3 percent to its highest level since February 2013.
The Nifty Index on the National Stock Exchange climbed 1.4 percent to 7,108.75, an all-time high, on volumes that were 54 percent higher than the 30-day average.
Proponents see Modi, who has overseen 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.
The BJP leader improved access to electricity and eased project approvals after taking power in Gujarat. That provided a growth platform for companies in the state such as Adani Enterprises Ltd. Adani’s shares, which have tripled since Sept. 13, jumped 11 percent today.
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.