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Indian stocks rise for second day as Modi secures coalition support

Indian stocks rise for second day as Modi secures coalition support
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June 06, 2024 (MLN): Indian stocks are headed for second day of gains as Indian Prime Minister Narendra Modi is on track for a third term in power after two key allies pledged their support to form a new government, as Bloomberg reported.

The benchmark NSE Nifty 50 Index gained as much as 1.2%, extending Wednesday’s 3% rally, and is on course to recoup its losses following the shock election result that saw Modi’s party losing its majority in parliament.

Investors will be closely watching who will be appointed to key cabinet portfolios and whether the coalition’s policies align with the previous administration’s focus on boosting infrastructure and manufacturing.

“Markets will keenly watch certain key ministries such as finance or road and highways, and whether there are credible faces heading them,” said Niraj Bhagwat, equity portfolio manager at Wellington Management. “Foreign investors will be enthused to see the key ministries largely unchanged in terms of policy direction.”

Leaders of the the Bharatiya Janata Party-led National Democratic Alliance, including Nitish Kumar of the Janata Dal (United) and N. Chandrababu Naidu of the Telugu Desam Party, agreed to back Modi after reaching an accord in New Delhi on Wednesday.

The renewed interest among likely heads of various ministries comes as investors assess the likely concessions Modi may have to make in a coalition government.

It wasn’t immediately clear Wednesday what demands were made by the two leaders and to what the BJP agreed in order to secure their support.

“We expect the market to remain obsessed with government formation exercise,” said Gautam Duggad, an analyst at Motilal Oswal Securities Ltd.

Despite Wednesday’s upward move in stocks, institutional flows offer some caution for now.

Foreign investors dumped $1.5 billion worth of Indian equities on Tuesday and extended the selloff by another $678 million Wednesday, according to provisional data from the NSE.

Local mutual funds and banks however resumed to buying as they purchased $546m worth shares on Wednesday.

“Investors should look through the near-term uncertainty and consider the beneficial long-term consequences of India’s surprise election results,” Jean Chia, global chief investment officer at Bank of Singapore, wrote in a note.

While being neutral on India in Asia allocation, “we favor domestic sectors and industries that could benefit from the BJP’s 2024 Manifesto, which includes tourism, agriculture, housing,” she said.

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Posted on: 2024-06-06T11:00:30+05:00