May 20 (Reuters) - 1130 GMT: MAIN INDICES POST LARGEST GAINS IN OVER FIVE YEARS AFTER EXIT POLLS Indian stocks surged as exit polls indicated that Prime Minister Narendra Modi would romp back to power in the general election, after a difficult and divisive campaign.
Investors said there had been capital on the sidelines, awaiting the results, but added that sustained gains would only come with major reforms, leading to increaded earnings.
“India faces many challenges both in physical infrastructure and institutional infrastructure, but it has great potential too,” said Arjen van Dijkhuizen, Chief Asia economist at ABN AMRO in Amsterdam. “Modi 2.0 has the impetus to implement reforms and improve India’s growth rate.”
Both the benchmark Nifty index and the Bombay Stock Exchange index gained about 3.7%, the largest one-day gain since Septmber 2013 for both. Stocks in companies owned by Modi’s biggest supporters - Reliance Industries and the Adani Group - posted the highest gains.
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The Nifty was last at 11,828 points, against a historical high of 11,856. The Bombay index was also close to a historical high. Chart showing the rise in the Nifty since Jan. 1, compared to Adani Ports, Adani Power, Adani Enterprises , Adani Gas, Adani Transmission and Reliance Industries
Nilesh Shah, managing director at Kotak Asset Management Company, said: “The equity market today is pricing in (a Modi) government, series of rate cuts, revival in earnings’ growth, revival of investments, managing trade deficit with China, relatively stable oil prices at current level.
“If these assumptions are met, then market has room to move ahead,” he said on the Reuters Trading India chatroom.
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The partially convertible rupee was trading at 69.725 per dollar at 1120 GMT, after rising to 69.3550 earlier, making it up 1.2 percent on the day. The gain, if sustained, would be the highest since December.
The benchmark 10-year bond yield was trading at 7.28 percent, down 5 basis points on the day.
Mayuresh Joshi, senior vice president and fund manager at Angel Broking, however cautioned that if the final results, due on Thursday, were contrary to the exit polls, “then 10,900 is the level to watch out for in Nifty, because if that breaks we will see further downside”. 0650 GMT: SOME ASK, CAN EXIT POLLS BE WRONG? Some opposition politicians in India are taking comfort in the wrong predictions made by pollsters in the U.S. presidential election in 2016, the Brexit referendum also in 2016 and in last week’s Australian election.
Most of the exit polls in India show Modi’s ruling Bharatiya Janata Party (BJP)-led alliance winning about 300 seats in the 543-member parliament, a comfortable majority and above predictions made before the six-week election got underway in April. The opposition Congress party was a distant second.
Votes will be counted on Thursday and results are likely the same day.
“I believe the exit polls are all wrong,” said Congress leader Shashi Tharoor in a tweet. “In Australia last weekend, 56 different exit polls proved wrong. In India, many people don’t tell pollsters the truth fearing they might be from the government. Will wait till 23rd for the real results.” “Quiet Australians” are the latest to upset election forecasters’ expectations Officials seal an Electronic Voting Machine at a booth in Kolkata after voting closed on Sunday. REUTERS/Rupak De Chowdhuri
Sriram Karri, a novelist and columnist, said exit polls were like “trailers for a movie.”
“Could mislead ... but this time I feel the story they tell won’t go wrong,” Karri told the Reuters Trading India platform.
In India, exit polls famously got it wrong in 2004, when they incorrectly predicted a victory for the BJP alliance.
Karri said: “Exit polls can and may go wrong...but largely a repeat of 2004 is very unlikely here.”
The Hindustan Times newspaper said Prime Minister Narendra Modi converted the election into a referendum on himself.
“It was almost as if he was standing from all the constituencies, and candidates were irrelevant,” it said. “A substantial element of the electorate has thus chosen a PM, not their MP.” 0128 GMT: FOUR FACTORS THAT HELPED MODI - VETERAN EDITOR
Prime Minister Modi was helped in the election by four key factors, wrote Shekhar Gupta, editor-in-chief of The Print news portal. India’s Prime Minister Narendra Modi waves at his supporters during a roadshow in the city of Varanasi. REUTERS/Adnan Abidi
India’s upper castes, usually divided or supporters of the opposition Congress party, appear to have consolidated behind Modi, said Gupta, a veteran writer on politics and television talk-show host.
The BJP, he added, had overcome “disastrous macroeconomics with effective microeconomics”, providing some of India’s poorest with toilets, loans, cooking gas connections, housing and electricity.
“These schemes have touched far too many people in quick time to not matter to them,” he wrote. “They neither understand nor bother about whether the GDP is up or down, reliable or fudged. They are too poor to yet be in the organised job market.”
Thirdly, Gupta said, Modi’s government had a good record of building hard infrastructure, roads, bridges and ports. And lastly, he said, the huge chunk of voters who are under 22 have emerged as a huge support base for Modi.
“They’ve known only one leader, heard just one message, have no reference to the pre-Google context,” he said. “Most important: They mostly haven’t yet gone out in the job market.”
Gupta cautioned while the four factors had helped Modi, he was not sticking his neck out with a prediction since votes were still to be counted.
Other political strategists said Modi’s presidential-style campaign and his aggressive response after a surge in tensions with Pakistan in February-March appear to have worked well, and overcome concerns about unemployment and falling farm incomes.
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Other factors that could have helped the BJP were their enormous resources, and the inability of the opposition Congress party, led by Rahul Gandhi, to form meaningful alliances.
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