The moment of truth is approaching for Modi’s National Democratic Alliance as federal election results are released on Thursday. Six of seven polls are predicting an absolute majority for the coalition led by PM Narendra Modi Bharatiya Jana Party (BJP), which is expected to surpass the majority mark of 272 seats in the lower house of parliament. This sounds very positive for investors, since a return of PM Modi’s with a stronger position would leave the government free to set up its spending plan without much objections.

Indeed, as economic growth is slackening at six-quarter low (Q4 2018 y/y GDP: 6.60%), the BJP is willing to push for a 5-year plan consisting of infrastructure spending for a total of 100 trillion rupees ($1.44 trillion) and 25 trillion rupees ($358.68 billion) on agriculture and rural development. This decision would also be timely for the Reserve Bank of India, which has already reduced its current rate (currently 6%) twice this year and is about to implement a further 0.25 percentage point reduction in June 2019 amid persisting trade tensions. There is therefore a limited upside potential for INR looking forward, although a positive headline with regard to current election results would mostly benefit Indian equities, bonds and INR.

Currently trading at 69.6687, USD/INR is heading along 69.46 short-term as the Fed’s April/May meeting minutes are released this evening.

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