India shares at record high on exit polls

A construction worker in India Many expect a win for the BJP and allies to help boost infrastructure investment

Indian stock markets have risen to a record high after exit polls suggested the Narendra Modi-led Bharatiya Janata Party (BJP) and its allies are on course to win the general election.

India's main stock index, the Sensex, rose 1.7% to 23,941.32 points in early trade on Tuesday.

This follows a 2.4% gain on Monday ahead of the exit poll results.

Analysts said investors were hopeful that a BJP win could help reverse the slowdown in India's economy.

Exit polls released by Indian media organisations on Monday evening showed the BJP-led National Democratic Alliance (NDA) well ahead in terms of predicted seat wins, and the governing Congress trailing badly.

Analysis

Narendra Modi has campaigned on the economic record of his home state and presented himself as the pro-business candidate.

And as the momentum behind his campaign has grown, the country's key stock market indices have risen sharply over the past few months - helped by foreign investors injecting over $5bn (£3bn) in to Indian companies.

Most exit polls released after the five-week election marathon came to an end have suggested Mr Modi would get a strong mandate

But some investors are cautious - not just because opinion polls have been wrong in previous elections - but also because big question marks remain over how much difference a new government can make at least in the short term to spur India's economy which has been growing at it's slowest pace in a decade.

However, exit polls are notoriously inaccurate in India, partly because of the size and complexity of the electorate - in the last two elections, they were inaccurate and over-estimated the BJP's gains. Votes will be counted on 16 May.

Mr Modi has campaigned on the promises of economic growth amid widespread dissatisfaction over the slowing economy and high inflation in recent years.

One of the big criticisms of the Congress-led United Progressive Alliance (UPA) government was that it delayed the implementation of key reforms, seen by many as key to long-term growth.

Many critics had alleged that the government bowed to pressure from smaller regional allies over key issues.

Analysts said that a clear majority for the BJP and its allies in the latest elections could give the government the necessary support to take measures aimed at boosting growth and investment in the country.

"Looking through the noise, if the base scenario [BJP majority] happens, two things change structurally - first, you get a pro-investment government and one that is focused on infrastructure," said Salman Ahmed, global fixed income strategist for Lombard Odier Investment Managers.

"A strong government that understands the need for infrastructure should be able to get reforms in place and put in place the conditions for long-term growth."

'Not constrained'

David Kuo, director at The Motley Fool a financial advisory firm, told the BBC that "investors are betting that BJP and its allies will get a majority mandate, which means they will not be constrained by the demands of smaller regional allies when it comes to implementing key reforms".

"Given his success as the Chief Minister of Gujarat, Narendra Modi is widely seen as pro-investment and pro-business.

"And that is something that India needs badly, when it comes to boosting foreign as well as domestic investment." he said.

More on This Story

India elections

More Business stories

RSS

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.