Fears Of Poll "Bolt From The Blue" Has India Markets Worried

Industry:
Investors in India are bracing for an extreme event risk next week: Prime Minister Narendra Modi failing to retain power.
The optimistic tone for the nation's assets has fizzled out as the trade impasse combines with concern about PM Modi's ability to repeat his landslide 2014 victory amid a resurgent opposition, farm distress and a job crisis. A result that upsets the market's base case view -- the ruling party winning with a slim majority -- could lead to an adverse reaction, analysts say.

"At a time when the trade spat has roiled risk assets globally, the worst outcome will be like a bolt from the blue," said Anindya Banerjee, currency strategist at Kotak Securities Ltd. in Mumbai. "India will see outflows from both stocks and bonds, and the rupee could tumble to 75 per dollar and more."

The currency, Asia's top performer in March, has fallen 1.2 percent to 70.0325 since President Donald Trump's tweets rekindled the trade spat with China earlier this month. The S&P BSE Sensex Tuesday halted a nine-session losing streak, avoiding the longest-ever stretch of losses, only to decline again on Wednesday as sentiment remains fragile.


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