A roadside vendor places Indian rupee notes in a plastic container. (Photographer: Dhiraj Singh/Bloomberg)

BJP Win In Gujarat To Improve Sentiment Around Rupee, Nomura Says

Japanese brokerage Nomura believes a win for the ruling Bharatiya Janata Party in Gujarat -- as forecast in the exit polls -- would improve the sentiment across asset classes in India, especially around the local currency.

Exit polls indicate that the Bharatiya Janata Party would secure a majority of over 100 seats, and this will be viewed as positive for BJP ahead of the 2019 Lok Sabha elections.

The Indian rupee has appreciated over 3.7 percent since Uttar Pradesh elections in March 2017. Nomura expects a similar trend to sustain if the outcome of the Gujarat elections too turn out favourable for the Narendra Modi-led party.

BJP Win In Gujarat To Improve Sentiment Around Rupee, Nomura Says

The brokerage expects the rupee to appreciate part due to expectations of a positive election outcome, as concerns around fiscal policy and growth are largely priced-in. It continues to expect that Asian markets would remain in a ‘sweet spot’ with stable growth and low inflation, thereby serving an environment favorable for rupee appreciation.

Nomura has a medium-term constructive view on the rupee, largely supported by a recovery in growth, credible RBI policy, continued economic reforms as well as strengthening forex exchanges reserves. On the flipside, it believes that rising oil price remains a key risk to rupee in the near term.