Indian bond yields seen lower as exit polls predict Modi govt's continuity

Indian government bond yields are expected to open with a gap down on Monday, with investor sentiment likely boosted after exit polls over the weekend signaled that Prime Minister Narendra Modi's government will secure a third term.
 

India's benchmark 10-year yield is likely to move in a 6.94 per cent -7.00 per cent range, following its previous close of 6.9809 per cent , a trader with a state-run bank said.
 

"The exit polls have calmed the nerves, and we are expecting a strong rally in bond prices at the opening itself, and through the day, we could see some consolidation with benchmark bond yield around 6.94 per cent -6.95 per cent levels," the trader said.
 

Most exit polls projected the ruling National Democratic Alliance (NDA) could win a two-thirds majority in the 543-member lower house of parliament, where 272 is needed for a simple majority.
 

Madhavi Arora, an economist at Emkay, said policy continuity will be good for risk assets in the immediate run and macro stability in the medium term and expects bull steepening in government bond yield curve in coming months.
 

The results of the general election will be announced on Tuesday. India's exit polls have a patchy record, which could curb investors undertaking more aggressive calls on decline in yields.
 

Fiscal consolidation will also aid sentiment, after India's fiscal deficit for fiscal year 2024 was 5.63 per cent of gross domestic product, lower than its full-year target of 5.8 per cent .
 

July budget will indicate whether there is any material shift in economic policy stance, while exit polls support lower bond yields and rupee appreciation, but move depends on RBI willingness, Citi Research said in a note.
 

India's economy grew at a faster-than-expected pace of 7.8 per cent year-on-year in January-March, pushing fiscal 2024 growth to 8.2 per cent , from an earlier government estimate of 7.6 per cent .

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