* NSE index surges up to 1.7 pct to record
* Rupee gains to strongest since July 2013
(Updates with exit polls)
By Abhishek Vishnoi and Rafael Nam
MUMBAI, May 12 Indian shares are seen surging to
a record high and the rupee and bonds could hit new multi-month
highs when trading opens on Wednesday after exit polls showed
Bharatiya Janata Party and its allies winning a majority in the
The projections could especially benefit
domestically-focused shares such as ICICI Bank as the
BJP-led coalition is widely seen as setting the stage for a
revival in confidence, investment and growth in Asia's
India's NSE index has already surged 18.7 percent
since Narendra Modi became the BJP prime minister candidate on
Sept. 13. Foreign investors have been especially strong buyers
into the rally, with a net $20.1 billion in purchases last year
and about $4.3 billion so far in 2014.
The index surged 4.3 percent over Friday and Monday hitting
record highs in each of the sessions. Gains in Indian-based
assets in global markets surged after the exit polls, including
the 1-month rupee NDF and U.S.-listed shares of
Indian banks such as ICICI Bannk.
Still, analysts warn against exuberance as exit polls by
media organisations have proven unreliable in the past. The
actual results for India's five-week long elections will be out
"A lot of expectation-based flows have come through. 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 in London.
"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.
Four major exit polls for India's general election forecast
a victory for the opposition coalition with results ranging from
261 to 289 parliamentary seats.
BJP and its National Democratic Alliance would need to win
273 seats in the 545-seat parliament to clinch the most seats in
India's lower house, but analysts say even a number close to
that would be seen as enough to lead to a stable government.
A win of above 240 seats could spur stock market gains of
15-20 percent over the next month, Macquarie had estimated in a
report ahead of the exit polls.
Markets are already factoring in such a scenario. The
broader NSE index gained as much as 2.35 percent to a
record high of 7,020.05 points on Friday, surpassing its
previous record high of 6,871.35 points hit on Friday.
The partially convertible rupee rose to as high as 59.51 per
dollar, its strongest since July 29, while the benchmark 10-year
bond yield fell as 4 basis points to 8.71
percent, a level last seen on March 13.
"Infrastructure, engineering, cement, power and industrial
stocks should gain if a Modi-led government comes to power,"
said UR Bhat, managing director, Dalton Capital Advisors,
"One should take exit polls with a pinch of salt, but people
will latch on to them as they are the only information available
ahead of actual results."
Domestic-oriented shares have led the rally, with the NSE
bank sub-index hitting a record high. ICICI Bank Ltd
gained 2.2 percent, for a cumulative gain of 27.3
percent in 2014 compared to NSE index gain of 11.26 percent.
Infrastructure shares also gained, on hopes a Modi
government would revive investments. Ambuja Cements up
1.8 percent, while state-run power equipment maker Bharat Heavy
Electricals Ltd surged 2.1 percent.
(Writing by Rafael Nam; Additional reporting by Himank Sharma,
Swati Bhat, Suvashree Dey Choudhury, and Neha Dasgupta in MUMBAI
and Sujata Rao-Coverley in LONDON; Editing by Shri Navaratnam
and Toby Chopra)