Today, it is a foregone conclusion that Modi will be re-elected as the Prime Minister of India and will start the next five-year term. Buoyed by this, Indian stock markets rose sharply, hitting a record high, and the price of the Indian rupee and government bonds also rose.

Today, it is a foregone conclusion that Modi will be re-elected as the Prime Minister of India and will start the next five-year term. Buoyed by this, Indian stock markets rose sharply, hitting a record high, and the price of the Indian rupee and government bonds also rose.

Modi’s ruling coalition won a historic election

On the afternoon of May 23, Beijing time, preliminary statistics showed that Indian Prime Minister Modi was bound to win a second term.

India New Delhi TV station reported live on May 23 that according to the general election vote counting results, as of 15:25 Beijing time, the Bharatiya Janata Party (BJP) led by Indian Prime Minister Narendra Modi (Narendra Modi) won won an overwhelming victory, winning 342 of the 542 seats in the Indian Parliament.

Although it needs final confirmation by the Election Commission, based on the current vote statistics, Modi's re-election as prime minister is a foregone conclusion. Swaraj, India's Foreign Minister and senior leader of the People's Party, also said on Twitter that the People's Party had won a "huge victory."

A clear majority for Modi's party will also enable him to press ahead with reforms to address unemployment and rural poverty that have persisted during his five years in power.

Modi faced pressure at the start of his campaign, having suffered repeated defeats in local elections in December amid growing anger over farm prices and unemployment. However, analysts say that a suicide car bomb that killed 40 Indian policemen in February in the disputed Kashmir region benefited the right-wing Bharatiya Janata Party. Since then, the focus of the campaign has turned to the confrontation between India and Pakistan.

Voting for the Indian general election began on April 11 and lasted 39 days. According to the election schedule, the 23rd is the opening date for the general election. Vote counting will begin at 8 a.m. local time and is expected to end later today.

There are 900 million registered voters in this election, 84.3 million more than the number of voters in the 2014 general election. Previous reports pointed out that India’s general election this year is expected to cost US$7 billion, which is regarded as the largest and most expensive election in the world.

Indian stock market exceeded 40,000 points during intraday

R Sivakumar, head of fixed income at AxisMutual Fund, said, "For global investors, political stability and continuity are an important factor, which will make India the focus of global equity investors."

With the victory of the Bharatiya Janata Party, the three Indian stocks, bonds and foreign exchange markets rose in response.

The Indian stock market soared to a historic high during the session. The SENSEX index in Mumbai once hit a record intraday high of 40124.96 points, and then fell back. At the close, it fell 0.7%.

India's NSE Nifty index rose 0.5% to 11,796.5 points during the day, reaching a high of 12,000 points for the first time during the session. The one-month forward exchange rate of the Indian rupee against the U.S. dollar rose in early trading, rising 0.4% to 69.75; the spot exchange rate of the Indian rupee against the U.S. dollar opened 0.3% higher at 69.45. The 10-year Indian government bond yield fell 6 basis points to 7.2%, the lowest level since April last year.

Since the beginning of the election season, Indian stock markets have soared to new highs.

In early trading on April 18, India's SENSEX index soared to 39,420 points, setting a new high. Just two days ago, the SENSEX index had just hit a record high of 39,275.64 points. In early April, the SENSEX index exceeded the 39,000 mark for the first time. At the same time, India's Nifty50 Index also rose to a record high of 11,856.15, exceeding the previous record high of approximately 11,810 points.

On May 20, exit polls released after the Indian election showed that the National Democratic Alliance led by the ruling Bharatiya Janata Party won, which means that the current Prime Minister Modi is expected to be re-elected.

Affected by this news, Indian stocks and exchanges rose. The Bombay Stock Exchange Sensex index achieved its largest single-day increase of 3.75%, closing at 39,352 points, a record high. The NSE Nifty 50 index surged as much as 2.5%, its biggest gain since October 12. The exchange rate of the Indian rupee against the U.S. dollar also rose sharply, rising from 70.22 rupees to 1 U.S. dollar at the close of the 17th to 69.63 rupees.

What impact will the general election have on the performance of the Indian market?

The Indian stock market has soared 400% in 10 years, which has made many people stunned.

Bloomberg Bloomberg data shows that from April 30, 2004 to April 30, 2019, the MSCI India Index achieved a total return of 623%, exceeding the 308% of the CSI 300 Index in the same period and the 209% of the MSCI Global Index in the same period. The U.S. S&P 500 Index returned 263%.

TEDA Manulife Fund stated that in 2014, during the last general election, Modi’s Bharatiya Janata Party (BJP) won a total of 282 of 545 seats. In 2014, the party only participated in 427 of them. This is 3 For the first time in 20 years, a political party can obtain more than half of the seats in the Lok Sabha , which means that the Indian Party can independently form the government. Looking back on the past five years, the Modi government’s amazing mobilization capabilities and reform achievements in various fields also reflect in person with them The strong position of the House of Representatives is not unrelated.

The chart below summarizes the trend of Indian capital markets before and after the 2014 Indian elections, which shows that the market expects the PPP’s winning rate to increase and the election will be settled after May.

TEDA Manulife Fund believes that if we further review the 7 general elections since 1991, the medium and long-term returns of the MSCI India Index rose 5 times after the election results were announced, with the average return being 6.77% in 3 months and 12.26% in 6 months. 24.28% in 12 months. This shows that as the election results are announced, the political situation in India gradually becomes clear and stable, and investors’ expectations for economic growth will drive the market. Therefore, the early stage of the election usually provides a better entry point outside this year. National funds purchased US$9.5 billion in Indian stocks

ANZ Bank pointed out in a recent research report that foreign capital inflows into the Indian market reached a record high, reaching US$6.1 billion in March. Khoon, the bank’s head of Asia research. Goh said: "In addition to expecting policy continuity after the election, foreign investors also look forward to the possibility of further interest rate cuts by the Bank of India to boost economic activity."

Previously, the Bank of India had completed its second interest rate cut this year in April. The next rate cut is expected to be in June or August due to a more dovish Fed and China's recent economy. Policies have also helped the Indian stock market.

Bloomberg reported that optimism that Modi will promote reforms during his second term may attract more foreign investment to India this year. India is already Asia’s largest destination for overseas cash.

“Foreign investors have been preparing for a Modi victory.” Ocean Dial David Cornell, chief investment officer at Asset Management in London, said: "Given the size of the Indian economy and the opportunities it offers, India is woefully underinvested. There are signs that Modi will use his re-election to bolster his reform agenda, This will trigger more inflows into ”

The Indian market has certain restrictions on overseas investors. To invest in the Indian market, domestic investors can also choose Hong Kong as a springboard. Hong Kong has some fund products for the Indian market, and there are also some securities firms that have channels to invest in the Indian market.

Sushant Kumar, equity fund manager at Mumbai-based Raay Global Investments Pvt., said: "If this trend continues, everyone should be happy to see a stable government because the economy needs stability."

Source : China Fund News (ID: chinafundnews)