Investors Focus on Next Steps as Modi Heads for Second Term

(Bloomberg) -- Indian stocks, rupee bonds and dollar-denominated notes from Indian companies recorded gains Thursday as Prime Minister Narendra Modi’s BJP party looks set to win an outright majority in elections. Markets had partially priced in a victory after exit polls this week pointed to Modi’s return to power.

India’s S&P BSE Sensex jumped as much as 2.6% to a record high and briefly hit the 40,000 milestone level. The rupee rose as much as 0.4% earlier and is now little changed. Indian corporate dollar bonds spreads tightened 1 or 2 basis points.

Here are some views from investors and analysts who are now focusing on Modi’s next steps to boost the economy.

STOCKS

HDFC Securities Ltd. (Deepak Jasani)

• The Sensex and the Nifty can rise another 2% from these levels if the BJP secures a majority on its own. A lot of positives are already discounted, framing of policies will decide further direction

Morgan Stanley (Ridham Desai)

• Indian investors will shift focus to the economic growth cycle
• Sees Sensex touching 45,000 and the NSE Nifty 50 Index reaching 13,500 by June 2020; it previously had a target of 42,000 for Sensex by end of 2019

Avendus Capital Alternate Strategies Pvt. (Vaibhav Sanghavi)

• Modi’s re-election signals continuity in policy making and boosts expectation of steps to bolster economic growth
• We would be focusing on investing in companies which inherently have a robust business model, marred by temporary dislocation of economic activity

RUPEE BONDS

Aberdeen Standard Investments (Lin Jing Leong)

• With PM Modi at the helm with such a majority, I am sure that he will do his best to remain on the fiscal consolidation path, continue with structural reforms execution
• Likes the highly rated corporate papers, and is overweight rupee sovereign and company bonds in India, especially in the short end of the curve

ICICI Securities Primary Dealership (Shameek Ray)

• Rupee-denominated corporate bond sales are expected to pick up pace as borrowing costs decline on confidence that the return of Modi government will aid policy continuity and stability
• Investors had build cash positions due to election uncertainty and will now look to deploy them

FirstRand (Paresh Nayar)

• Modi’s re-election will bring back foreign investors in sovereign and corporate debt, who have been sitting on the sidelines waiting for the election results
• Once the euphoria settles down, the key to foreign inflows will be foreign-direct-investment reforms, liquidity measures and tackling of NBFC issues

USD INDIA CORPORATE BONDS

Standard Chartered (Bharat Shettigar)

• There could be mild spread tightening for Indian USD bonds on the back of the election results
• However, any significant upside will be dependent on the new government’s efforts to revive growth and undertake deep structural reforms in the medium-term

Bank of Singapore (Todd Schubert)

• While the news should be salutary overall for Indian corporate dollar bonds, it should be especially beneficial for the higher beta names such as the renewable energy sector
• Markets like consistency and continuity, and would view the strong showing as providing Modi a platform to enact more pro-business reforms during his next term

Mizuho Securities (Mark Reade)

• Following the weekend exit polls, Indian USD bond spreads moved 5-15bp tighter in anticipation of a BJP victory. So although today’s results will be viewed as market-friendly, in USD bonds the news is largely priced-in

Aquarius Investment Advisors (A.S. Thiyaga Rajan)

• Modi victory will boost Indian dollar bond sales as those companies waiting on the sidelines will now jump into the market to raise offshore funds
• Modi’s re-election will boost appetite for Indian bonds, and create a positive sentiment for next few weeks

--With assistance from Anurag Joshi, Kartik Goyal and Matt Turner.

To contact the reporters on this story: Divya Patil in Mumbai at dpatil7@bloomberg.net;Denise Wee in Hong Kong at dwee10@bloomberg.net;Ameya Karve in Mumbai at akarve@bloomberg.net;Subhadip Sircar in Mumbai at ssircar3@bloomberg.net

To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, ;Divya Balji at dbalji1@bloomberg.net, Finbarr Flynn

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