Rupee set to rally after exit polls predict Modi win

<p>The rupee dropped 0.2% on Friday, in the lead-up to the exit polls.</p>
The rupee dropped 0.2% on Friday, in the lead-up to the exit polls.

The Indian rupee is expected to rally at the open on Monday after exit polls indicated a third term for Prime Minister Narendra Modi.

Non-deliverable forwards indicate the rupee will open at 83.10-83.12 to the U.S. dollar, compared with 83.4625 in the previous session.

The “big down move” at the open for the dollar/rupee will “likely run into good buying interest”, a forex trader at a bank said.

“Only once the actual results confirm what the exit polls are forecasting do I think that a dip below 83.00 is possible.”

Weekend exit polls projected the alliance led by Modi’s Bharatiya Janata Party (BJP) to increase its 303 seats in the 543-member lower house of Parliament and possibly get a two-thirds majority.

Exit polls in India have a patchy record, often getting the outcome wrong. The actual results will be announced on Tuesday.

“If the exit polls are accurate … it would leave the BJP with a very strong mandate from which to continue enacting growth-enhancing structural reforms,” Capital Economics said in a note.

Goldman Sachs said that “political continuity would contribute to a stable macro-economic environment and continuing reforms.”

The rupee dropped 0.2% on Friday, in the lead-up to the exit polls.

On Friday, we witnessed “sizable” hedging from importers and dollar short exits, another fx trader said.

“These positions will need to be rebuilt and is good in a way (for the rupee),” he said.

Following the election results on Tuesday, the focus will shift to the Reserve Bank of India’s policy decision and U.S. non-farm payrolls, both due Friday.

  • Published On Jun 3, 2024 at 04:07 PM IST

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