Monday 20th May, 2019

The Indian rupee opened stronger and with a huge gap of almost 72 paisa at 69.4950/5050 against its previous session’s close of 70.22 and surged to a near two-week high against the dollar in early session, after most exit polls predicted a second term for Prime Minister Narendra Modi.  Most exit polls released yesterday showed that the ruling Bharatiya Janata Party-led National Democratic Alliance will retain power. Eight out of 10 exit polls predicted that the NDA would win more than the 272-seat majority mark, while two forecast that the Modi-led alliance would fall just short of the majority. At the higher end of the estimates, the NDA was expected to win around 350 sets and the lowest projection was of it winning 242 seats.  A gap-up opening in the rupee came after various exit polls indicated victory for the ruling party. However, investors remain cautious of the actual outcome, due later this week, as these polls have been inaccurate in the past.  Further gains in the local unit were capped as a large state-run bank and a European lender bought dollars, likely on behalf of importers.  Unwind of precautionary hedges may drive INR strength, but overall outcome seems close with broad market expectations. Hence, follow through price action of INR at least into the final vote count and result declaration on May 23 will likely be consistent with broad USD trend.  Meanwhile, crude oil prices rose, with the benchmark Brent crude contract surging above $73 per barrel, after Saudi Energy Minister Khalid al-Falih indicated there was consensus among OPEC and allied oil producers to continue limiting supplies, Reuters reported. It was last trading 1.4% higher at $73.22 per barrel. The Indian economy is passing through a rough patch because a lot of data indicators are showing a slowdown, so people will wait for announcements from the new government/cabinet to see what policies will be made.  Intraday, today the rupee is expected to trade with a bullish bias between 69.35 -69.75 ranges