After gapping lower at the open, USD/INR......>

INDIA: After gapping lower at the open, USD/INR sits close to the highs of the

day just ahead of the close of onshore trading as markets digest the poll

results from the general election. Modi has formally declared victory, extending

his time in office by another five years which initially sent Indian equity

markets to record highs (the SENSEX hit 40,124) before retreating and looking to

finish lower on the session as markets bought the rumour, before selling the

fact. The market was taken slightly by surprise with the extent to which Modi's

BJP took victory, with his party adding as many as 20 extra seats over their

election results in 2014, whereas early polling suggested his seat share could

diminish this year.

-INR implied vols have sharply dropped as the election risk is withdrawn, with

the 1m measure collapsing below 7 points for the first time since mid-April.

Risk reversals have corrected lower across the curve, with the sharpest falls

seen (unsurprisingly) in the short-term tenors. Reflecting the rise in spot,

however, USD/INR call options have been a popular trade with 70.50 and 69.60

strikes in demand.