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INDIA: Indian Equities Plunge With Election Count Tighter Than Anticipated

INDIA
  • According to Bloomberg, while Modi’s party is leading the election with a comfortable majority, they are significantly below the landslide win projected in exit polls. About half of the total votes polled had been counted as of 08:45BST/13:15 local time.
  • Early counts showed Modi’s Bharatiya Janata Party (BJP) and its allies in the National Democratic Alliance (NDA) were leading in more than 290 seats, slightly more than 272 needed for a majority in parliament but well short of the roughly 350 they won in 2019 and the 400 that Modi had boldly predicted he would win.
  • The tighter-than-expected vote count has weighed substantially on Indian assets, with USDINR up 0.4% and back towards the 83.5000 level, fully erasing Monday’s move lower. Similarly, the Nifty and Sensex indices have sharply erased this week’s prior gains, with both close to 5% lower on the session at typing. The Nifty index had lost as much as 8.5% earlier today – its steepest intraday loss in over 4 years. 1w implied USDINR vols have spiked back above the 4% level.
  • A slim victory for the Modi-led coalition raises questions on the new government’s ability to push through reforms, and this may weigh on the country’s assets moving forward. Yesterday, markets had interpreted a strong performance for the incumbent party as indicative of continuity in policy and ongoing reforms, contributing to a more stable macro-economic environment.
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