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Economy

Modi's decisive victory a 'game-changer for India'

BANGKOK -- It could be said that market participants in India have been betting on the Bharatiya Janata Party's general election victory, which became a certainty Friday. India's benchmark SENSEX stock index has risen 8% and the rupee has appreciated 3% against the dollar since the beginning of the month. In other words, the Hindu nationalist party now has a market and ballot box mandate to push ahead with promised economic reforms.

    Miguel Chanco, India economist for London-based Capital Economics, and Mark Williams, the research firm's chief Asia economist, issued a comment as the election results were unveiled Friday. "The strong BJP mandate could be a game-changer for India," the statement said.

     The decisive election victory will give "a strong platform from which to launch much-needed economic policy reforms," the two economists wrote. They also said the new government, which will hold a parliamentary majority on its own, forgoing the need to form a coalition, "will, without a doubt, be in a much stronger position to push through policy changes than anyone had thought even a week ago."

     Medha Samant, investment director for equities at Fidelity Worldwide Investment, said she views the result as "positive for Indian equities ... it should help improve the country's economic fundamentals and boost growth in the medium term."

     Samant said she is especially keen on sectors linked to domestic demand due to the "improvement in consumer sentiment." A relatively stable government could also be beneficial for the "cyclical sectors" as well, since it could lead to "a pick-up in infrastructure and improve project execution and provide a stable currency," Samant said.

     Leif Eskesen, chief economist for India and Southeast Asia at HSBC, said he anticipates that "the strong mandate will allow the new government to move forward with reforms." At the same time, Eskesen said, "change will take time, and the economic recovery is likely to be protracted."

     Expectations are high, he continued, but "it is important to not overestimate the potential impact of the election on the real economy in the short term."

     Moody's Investors Service issued a release Friday stating the election outcome "is likely to sustain investor sentiment." But Moody's is maintaining India's sovereign rating at Baa3, its lowest investment grade rating, with a stable outlook. "The election results on the country's credit profile will only be apparent over the next several months," the ratings agency said in a statement, "as economic policy measures are implemented."

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