MUMBAI: 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 US 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.”
Indian rupee ends little changed
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 US non-farm payrolls, both due Friday.