India’s election outcome key for domestic asset prices: ANZ

April 8, 2019

NEW DELHI - In a new research report, ANZ Bank says it believes India's election results will have a larger bearing on economic policy than near-term macroeconomic fundamentals, with a comfortable win for any coalition positive for domestic asset prices.

"A fractured mandate, however, will prove unsettling for the rupee and INR bonds, triggered by sharp portfolio outflows.

"Beyond election uncertainties, we remain constructive on the rupee, in line with the Reserve Bank of India's (RBI) dovish monetary policy.

"We are neutral on Indian government bonds (IGBs) given balanced risks via stepped up rupee liquidity injections amid a deteriorating fiscal position"

India will go to the polls starting this coming Thursday, April 11, with the general elections being held in seven phases till May 19. Results will be announced on May 23.

The ANZ report points out that most recent opinion polls have swayed in favour of the ruling Coalition compared to three months ago, when a tighter contest was predicted.

"This has helped revive sentiment towards Indian asset prices as a close contest is not considered the best outcome by markets," the report says. "However, opinion and exit polls have got it wrong before in the past." (ATI).