New Delhi: Amid a resurgent opposition, farm distress and a job crisis, investors in India are bracing for an extreme-event risk with a possibility of Prime Minister Narendra Modi failing to retain power after the Lok Sabha election.
According to analysts, a result that upsets the markets is the ruling party winning with a slim majority, which could lead to an adverse reaction.
Talking to media, Anindya Banerjee, currency strategist at Kotak Securities Ltd in Mumbai, said, “At a time when the trade spat has roiled risk assets globally, a worst outcome will be like a bolt from the blue. India will see outflows from both stocks and bonds, and the rupee could tumble to 75 per dollar and more.”
However, Raamdeo Agrawal, a market and election analyst for about 30 years told ET Now that markets expect continuity of incumbent government even if it is with a lower majority. He also said the Narendra Modi government may also benefit from the “there is no alternative” factor. He said no other leader in any other party right now measures up to Modi.
However, analysts expect India’s $2 trillion equity market to remain jittery with traders exercising caution before the election result, which will be out on May 23. The Bombay Stock Exchange saw a losing streak for nine days in a row, which changed only on Friday. After losing nearly 2,000 points in the previous nine sessions, the sensex gained 227 points, on Friday, while the Nifty rose 74 points, with nearly two-thirds of its components gaining.
Meanwhile, foreign investors continued to aggressively withdraw money out of domestic stocks. In the past four days, foreign investors have sold shares worth over ₹4,000 crore.