India elections 2024: Rupee drops to near all-time low of 22.73 to dirham; Sensex falls 4,400
Rupee, Sensex volatile as India's financial markets weigh in polling numbers
Dubai: The Indian rupee is trading close to its all-time low of 22.73 to the dirham as the financial markets weighed in on the polling trends to decide who will form the next government.
It was in the first week of May that the rupee hit its lowest point ever, of 22.73 to the dirham (or 83.53 to a dollar). It is now trading at 22.69-22.71 to the dirham, heavily influenced by the ongoing polling trends.
The rupee volatility mirrors what’s happening on the Sensex, India’s main stock market index, which is down more nearly 4,500 points just past 12pm India time. This reverses all of the gains made yesterday, when investors climbed in after exit polls released on June 1 showed a clear majority for the BJP-led NDA alliance.
The sentiment is still that the rupee will rally again, even as early as before the market closes today.
Today, with voting going on, the situation on the ground shows a different reality. While the BJP alliance is still in the lead, the opposition bloc led by the Indian National Congress has been making – surprise - gains.
This is what the markets are cottoning on, which led to the steep drop in the Sensex and the rupee.
“The INR is trading at 83.43 to the dollar, after having firmed up quite a bit yesterday (June 3), when it closed 83.14 or 22.63 to the dirham,” said Neelesh Gopalan, FX analyst at a Dubai based fintech AstraTech. (The India rupee's highest point so far this year was 22.51 to the dirham (or 82.695 to the dollar) on March 7.
The Adani Group and PSU (public sector unit) stocks have fared the worst today. Defensive sectors such as FMCG stocks are still doing well
Will the markets stabilise?
By 11.30am India time, the BJP alliance is still in pole position to form the next government, helmed by Prime Minister Narendra Modi. The party and its allies are ahead in more than 290 seats and above the 272 needed to win an absolute majority.
"So far, the counting of only 6 to 8 rounds have been done," said Vijay Valecha, Chief Investment Officer at Century Financial. "With total of 21 rounds to go, the final trends that can be taken as a proper confirmation will only be known by 12.00pm to 12.30pm India time (around 11.00am UAE time).
"The early polling trends suggest the ruling NDA alliance will cross the majority 272 mark with a thinner majority than in 2019.
"The BJP on its own is on track to secure 250 plus seats. Yet, the numbers in itself are a huge disappointment for investors as markets were hugely banking on BJP alone crossing 300 plus numbers without any major hurdles. For investors - domestic and overseas - the NDA government was seen as a decisive and stable government."
The INR is trading at 83.50 to the dollar, after having firmed up quite a bit yesterday (June 3), when it closed 83.14 or 22.63 to the dirham.
Exit polls get it wrong - big
This is where the June 1 exit polls come in. Each one of these polls put out by leading Indian broadcasters and publications pegged the NDA as winning well over 300 seats. Or even inching close to the 400 seat mark out of the 543 seats in the Indian Parliament.
"While the trend is on the weaker side, the rupee drop is not considerable,' said Antony Jos, Executive Director at Joyalukkas Exchange. "The sentiment is still that the rupee will rally again, even as early as before the market closes today."