Election results to keep bond yields, Indian rupee volatile in near term, say experts

Bonds

The Lok Sabha election results, which did not give a clear majority to any political party, is likely to keep bond yields and the Indian rupee volatile in the near term, experts said.

They added that alliances from external parties by the BJP-led National Democratic Alliance (NDA) or the Congress-led I.N.D.I.A bloc dampens the sentiments of traders and investors in the market.

“The election results are likely to keep both the rupee and bond yields volatile in the short run,” Sakshi Gupta, Economist at HDFC Bank said.

Adding to this, Madhavi Arora, Lead Economist at Emkay Global Financial Services, said any massive move in rupee against Asian Emerging Market peers will eventually see RBI’s tactical intervention.

Today, the Indian rupee opened marginally down at 83.48 against the US dollar, from 83.53 against greenback. Now, it is trading at 83.40 against the US dollar.

The 10-year benchmark bond 7.10 percent 2034 opened today at 7.0297 percent, as compared to 7.0382 percent close on the previous day. Currently, it is trading at 7.0354 percent.

Similarly, the old 10-year benchmark bond 7.18 percent 2033 opened today at 7.0998 percent, as against 7.1076 percent close on June 4, and is currently trading at 7.0908 percent.

Also read: Equity mutual funds meltdown: The biggest losers on the day of Lok Sabha election results

Election results

According to the Election Commission of India’s (ECI) website, BJP has won 240 seats in the Lok Sabha elections, which was followed by Indian National Congress wining 99 seats, and Samajwadi Party wining 37 seats.

The BJP-led NDA bagged 293 seats and the opposition bloc I.N.D.I.A finished at 233. BJP on its own has failed to reach the majority mark of 272.

The two allies of NDA - Chandrababu Naidu's TDP and Nitish Kumar's JD(U) - are expected to play a decisive role in clinching a majority as they hold the balance of the BJP-led NDA.

TDP has won 16 seats and JD(U) has won 12 seats.

Kumar will on June 5 take part in the NDA meeting scheduled in the national capital. Meanwhile, the I.N.D.I.A bloc will also hold a meeting in Delhi at around 6 pm.

Earlier today, TDP supremo N Chandrababu Naidu said his party was in the NDA and that he will be attending the National Democratic Alliance meeting to be held in New Delhi.

NDA constituent Janasena party's chief, Pawan Kalyan, will also be attending the NDA meeting at the national capital, a day after the alliance emerged victorious in Assembly and Lok Sabha polls in Andhra Pradesh.

Also read: Kotak advises caution on 'narrative' stocks; says stress fundamentals over hype

Volatility on June 4
On June 4, the Indian rupee fell and bond yield rose in afternoon trade as voting trends showed that Congress party-led I.N.D.I.A alliance is putting up a close fight against the NDA in the elections.

At 12:00 PM, the Indian rupee fell 36 paise to 83.5075 against the US dollar, as compared to 83.25 against the greenback at open. The Indian rupee opened almost 10 paise down from previous close.

Similarly, the 10-year benchmark bond 7.10 percent 2034 which opened flat today at 6.948 percent, jumped to 7.0564 percent at 12:00 PM, as compared to 6.944 percent closed on the previous trading session.