MUMBAI Dec 5 The Indian rupee rose to a
five-week high against the dollar and stocks jumped more than 2
percent to near record highs on Thursday as exit polls predicted
a strong showing for the key opposition party in recent state
Confirmation of a strong showing by the opposition Bharatiya
Janata Party when results are out on Sunday would be seen as
bolstering its chances of victory in general elections due by
May, according to analysts.
The BJP and its prime ministerial candidate Narendra Modi
are perceived by many investors in India as being more
business-friendly and willing to undertake reforms to tackle an
economy growing at its slowest in a decade.
Recent data are signalling the economy may be bottoming out
while the current account deficit has shrunk, adding to optimism
in Indian markets despite concerns about a potential tapering in
the U.S. Federal Reserve's monetary stimulus.
"Markets have already been performing well in India on the
back of the notion that a BJP government will move forward more
aggressively with investment in energy, infrastructure and
overall capex," said Sacha Tihanyi, currency strategist at
Scotiabank in Hong Kong, discussing a possible BJP victory in
elections next year.
Still, opinion and exit polls have a patchy track record in
India. Most surveys forecast the wrong outcome in the 2004
The rupee rose to as high as 61.52 against the
dollar, its strongest level since Oct 31. It was last trading at
61.56/57 compared to its 62.05/06 close on Wednesday.
The benchmark BSE index rose as much as 2.2 percent
to a session high of 21,165.60 points, approaching a record high
of 21,321.53 points hit on Nov. 3.
The strong showing bucked the trend in Asian shares, which
continued to be hit by worries of an early drawdown of U.S.
Indian markets have steadily recovered ground since a
volatile summer that saw the rupee hit a record low against the
dollar when fears of an early Fed tapering first surfaced.
Measures taken by India's central bank and the ruling
Congress Party have been seen as having helped that recovery.
Economic data has also turned more favourable, with data
this week showing the current account deficit narrowed to 1.2
percent of gross domestic product, the smallest deficit since
the June quarter of 2009.
Nonetheless investors see a BJP victory as potentially being
more beneficial to markets.
"Based on our discussions with investors, markets are
positively inclined towards Mr. Narendra Modi led BJP and less
so towards Congress, despite some course correction in policies
recently by the latter," UBS said in a 2014 outlook note to
clients on Wednesday.
(Additional reporting by Abhishek Vishnoi; Editing by Rafael
Nam & Kim Coghill)