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Jun 04, 2020 PRINT EDITION

India's markets fall as state exit polls show Modi struggling

MUMBAI: Indian markets weakened as exit polls in state elections augured badly for Prime Minister Narendra Modi's ruling

December 10, 2018

MUMBAI: Indian markets weakened as exit polls in state elections augured badly for Prime Minister Narendra Modi's ruling party just months before a general election.

The bearishness was reinforced by higher oil prices following an agreement by global producers to cut output, which will drive up India's import bill.

The rupee ended at 71.35 to the dollar, recovering from 71.45 per dollar, its weakest level since Nov. 20.

The 10-year benchmark bond yield rose by 11 basis points intraday to as much as 7.60 percent, the highest rise since Sept. 10, before ending at 7.59 percent.

Stock markets posted their worst close in four weeks with the broader NSE index ending 1.9 percent lower.

"The exit poll results are definitely slightly more towards the negative side than what the markets were expecting," said Neeraj Dewan, director, Quantum Securities.

Investors are scrutinising Friday's polls in five states - Rajasthan, Chhatisgarh, Madhya Pradesh, Telengana, Mizoram - for signs as to how Modi's Bharatiya Janata Party will fare in a general election that must be called by May.

If Modi were to win a second term in the general election without having to resort to a potentially unstable coalition, it would reassure investors wanting to see a continuation of financial reforms.

The results of the state assembly contests are expected on Tuesday. Exit polls, which have often proved unreliable in India, showed the BJP heading for defeat in one heartland state, Rajasthan, while Chhatisgarh and Madhya Pradesh were too close to call.

"The exit polls are mixed, but we don't want to take any risk before actual results are out given that oil is also up," said a trader at a foreign bank.

"Sentiment will remain cautious until state election results are out."


Oil prices extended gains on Monday after OPEC and its Russia-led allies agreed to cut production by a combined 1.2 million barrels per day next year.

A sharp fall in oil since October had brought some relief to Indian markets, and the prospect of prices rising again was unsettling.

India imports more than two-thirds of its oil requirement and higher crude prices adversely affects its current account deficit and inflation, and consequently the rupee exchange rate.

Meanwhile, oil-to-retail conglomerate Reliance Industries Ltd, led the declines in stock markets, closing 3.8 percent lower at its lowest level since Nov. 12.

Kotak Mahindra Bank Ltd was the top percentage loser, ending down 6.4 percent.

Copyright Reuters, 2018