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Traders bracing for Election 2014 results with $332 billion at stake

LiveMint logoLiveMint 16-05-2014 Santanu Chakraborty

Mumbai: India’s stock-market bulls have a lot riding on Friday’s election results.

The value of Indian equities has climbed by $332 billion since the main opposition Bharatiya Janata Party (BJP) named Narendra Modi as its candidate for prime minister on 13 September, while the benchmark BSE Sensex index rose 21% to an all-time high. Foreign investors poured $14.2 billion into the nation’s shares during the period, and bullish wagers in the options market outnumber bearish bets by the widest margin in 14 months.

Investors betting Modi will do more than the ruling Congress Party to revive economic growth will find out on Friday if his alliance won enough seats in parliament to form a majority government in the world’s largest democracy. The Sensex swung by an average 14% in the two days following the results of the last three elections, as final vote counts surprised the market, data compiled by Bloomberg show.

“This election is all about going long,” Supreeth Shankarghal, the chief executive officer at Quant First Asset Advisors India Ltd. in Bangalore, which manages about $100 million in options, said in an e-mail interview. “Most bets are on the bullish side on optimism over a BJP victory.”

The number of outstanding call options on India’s 50-stock CNX Nifty Index climbed on Thursday to 1.35 times put contracts, which give the right to sell. That’s the highest level since 28 February 2013, data compiled by Bloomberg show.

Trader euphoria

SGX CNX Nifty Index futures expiring this month dropped 0.4% to 7,110 at 9:08am in Singapore, while the MSCI Asia Pacific Index declined 0.8%.

The Sensex has climbed 13% in 2014, outperforming benchmark indexes in Brazil, Russia and China, while the rupee has strengthened 4.2% against the dollar. Inflows from overseas into India’s $1.3 trillion stock market this year are the highest among eight countries in Asia tracked by Bloomberg.

Proponents see Modi, who oversaw annual economic growth of 10% as the head of Gujarat since 2001, as a leader who can speed up infrastructure projects, while opponents blame him for 2002 riots that killed about 1,000 people, mostly Muslims. Modi rejects accusations of any wrongdoing.

The National Democratic Alliance (NDA), led by the BJP, is set to win 279 of the 543 parliamentary seats, according to an exit poll released on 14 May by NDTV and Hansa Research. Six surveys on 12 May showed the alliance winning 249 to 340 seats, with 272 needed for majority.

“The market is positioned for euphoria,” Chetan Jain, a derivatives analyst at Anand Rathi Financial Services Ltd. in Mumbai, said in a phone interview. “But it can go all the way down to the wire.” Bloomberg

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