Effects of general election
SINGAPORE (May 20): The Tantallon India Fund closed down 1.89% in April weighed down by the rupee and another bout of risk-off as crude prices spiked on US President Donald Trump’s decision to further limit Iranian oil exports and the Druzhba pipeline debacle. On the ground, corporate earnings for the small- and mid-cap universe continue to surprise on the upside, well ahead of the more muted performance out of the large-cap index heavy-weights. Market participants are in “wait-and-watch” mode, however, as the Indian general election (the largest democratic electoral exercise in history, with 900 million registered voters potentially casting a vote) draws to a close; a Modi victory would be a clear positive for sentiment and the market.
Despite positive flows (US$3.5 billion [$4.8 billion] from foreign institutional investors and US$3 billion into domestic equity funds), the US Federal Reserve’s and the Reserve Bank of India’s (RBI) messages on being “comfortably patient”, and a visible pickup in domestic corporate activity (M&A, and both equity and debt issuance), equity market participants have been largely apathetic through April. Risk assets have rebounded off the October 2018 lows; at this point, it would seem that the markets are “cashed-up”, in rotation/consolidation mode, and “waiting” for certainty in three weeks vis-à-vis the outcome of the general election.
