“Election exuberance is fizzling out quickly,” strategist Gaurav Garg at Citigroup wrote in a note. “The likelihood of the rupee further cheering policy continuity is very low.”
The rupee is likely to under-perform amid wider-than-expected trade deficit, cautious outlook toward emerging markets and risks of oil prices, Garg wrote. Oil is India’s top import item and a major driver of inflation and trade deficit.
says Modi’s win assures policy continuity and stability craved by investors, which in turn will lead to increased capital inflows. Overseas funds have bought $9.4 billion of local shares this year, the most after China, as they positioned for Modi getting a second term.
“The result is a clear medium-term positive for growth, inflows and rupee, which should also support the relative outperformance versus Asia,” analysts including Sonal Varma wrote in a note.
Goldman Sachs Group Inc. has a balanced stance. While the rupee may grind higher toward 69 per dollar in the next three months, the bank is neutral in the medium term because of the priced-in poll outcome, the currency’s modest overvaluation and a likely widening in the current-account deficit, analysts including Prachi Mishra wrote in a note.