India’s Stock Futures Surge as Polls Predict Landslide Modi Win

(Bloomberg) — India’s stock futures jumped after exit polls indicated a resounding victory for Prime Minister Narendra Modi’s ruling party in general elections that concluded Saturday.

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June contracts on the benchmark Nifty 50 Index climbed almost 3% in early trading on Monday, the most on record for the contract launched at the Gujarat International Finance Tec-City in July 2023. That’s after most pollsters predicted the Bharatiya Janata Party-led alliance to clinch between 350 and 400 seats in total. The estimates are substantially more than the 272 figure required for a majority in the 543-seat lower house of parliament. The votes will be counted on Tuesday.

A landslide win for Modi’s party would enable it to push through policies that are crucial for boosting India’s economic growth, already among the world’s fastest. That’s seen as renewing foreign investor enthusiasm toward the nation’s $4.7 trillion stock market and burnishing the appeal of local companies. The exit polls offer relief for investors after low voter turnouts and tight races in some states led to a jump in market volatility amid concern that the BJP might fall well short of Modi’s ambitious 400-seat target.

“The prospect of unobstructed functioning of the parliament in the third term under the Modi government is expected to deliver many progressive reforms in India,” said Deven Choksey, managing director of DRChoksey FinServ Pvt. in Mumbai “The market is and will be excited as the reforms will produce predictable earnings growth for India Inc., attracting dollar inflows.”

Offshore Indian rupee non-deliverable forwards climbed as much as 0.4% on Monday, with the nation’s bonds also expected to advance.

While the final results might differ from the exit polls, the strength of the projected victory is expected to benefit risk assets. Indian equities reached a record in May, while the bond markets are near their highest levels in about a year.

Read more: India’s Equity Rally Hinges on Modi Bettering 303-Seat Tally

Should the results on June 4 align with the exit polls, analysts expect the NSE Nifty 50 Index to reach a new record. The gauge slid nearly 2% last week as foreign investors treaded cautiously ahead of 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 may lead to the market spiking beyond 23,000 on Monday — a new high — and close to 23,500 on June 4th” if the numbers for the ruling alliance are above 350, he said.

Stocks to Watch

Shares of state-owned companies, infrastructure-linked firms and those of some corporates including the Adani Group and Mukesh Ambani’s conglomerate may be in focus Monday. About 90% of the 54 stocks that CLSA referred to as ‘Modi stocks’ in its May 29 note have beaten the Nifty index in the past six months.

These companies are perceived to benefit from the BJP’s pro-growth policies and their outperformance may extend in case of a strong election result, the note said. Engineering giant Larsen & Toubro Ltd., and power generators NTPC Ltd. and NHPC Ltd. are among CLSA’s preferred stocks.

Read more: INDIA REACT: Modi 3.0 a Done Deal, Victory Size to Decide Policy

“A cyclical upturn is underway in private capex, and political stability alongside, continue to make us like capex plays (Real estate, Industrials, Power) from a long-term perspective,” strategists at Jefferies Financial Group Inc., including Mahesh Nandurkar wrote in a note dated June 2.

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