Indian rupee
Indian rupee Image Credit: Gulf News Archives

The rupee gained with sovereign bonds as early trends showed Prime Minister Narendra Modi heading toward winning a second term.

The rupee advanced 0.3 per cent per dollar to 69.4625 per dollar as of 9:05 am in Mumbai, while the yield on benchmark 2029 bonds slid three basis points to 7.23 per cent, the lowest since January.

Investors are cheering Modi’s likely victory as it puts to rest concerns about the prospects of a coalition of several opposition parties forming the government. Optimism that Modi will boost economic reforms in the second term will likely lure more foreign inflows to a market that is Asia’s biggest destination for foreign money this year after China.

“Foreign investors have been positioning themselves for a Modi victory,” said David Cornell, London-based chief investment officer at Ocean Dial Asset Management. “India is heavily under invested given the size of the economy and the opportunity it offers. Any indication that Modi will use his re-election to bolster his reformist agenda will trigger more inflows.”

Foreign funds have purchased $9.5 billion of local shares this year, while rupee-denominated bonds have seen outflows of $476 million.