Goldman, SocGen See Rupee Gains From Potential Modi Reelection

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Strategists from Goldman Sachs Group Inc. to Societe Generale SA are expecting the Indian rupee to get a boost should Prime Minister Narendra Modi win a third term in elections.

“The high probability of policy continuity post election is likely to benefit the Indian rupee,” Kiyong Seong, lead Asia macro strategist at Societe Generale wrote in a note. The currency remains a favored Asian currency, according to Goldman Sachs.

The Indian rupee is already emerging as Asia’s top performer when the central bank has tamped down volatility with near-record reserves thanks to foreign flows into government bonds ahead of India’s inclusion in global indexes. A hawkish central bank has also boosted its appeal.

Investor confidence in the prospects of Modi’s return rests on favorable opinion polls, according to Goldman Sachs.

“Clients we met with appeared to infer that this outcome would contribute to a stable macro-economic environment and continuing reforms,” analysts led by Santanu Sengupta wrote in a note, after a marketing trip to Singapore and Hong Kong.

The rupee is little changed against the dollar this year, while the Thai baht has declined about 8% and the Indonesian rupiah fell by 5.3%, among the worst performers in emerging Asia.

A renewed effort to privatize more state-owned businesses and a manufacturing push will be key drivers to watch if Modi returns, Societe Generale said. Crude oil prices climbing to $100 per barrel and remaining elevated on geopolitical tensions is the biggest risk for the net energy importing nation, according to the bank.

--With assistance from Matthew Burgess.

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