June 3 (Punjab Khabarnama) : If the Narendra Modi-led Bharatiya Janata Party (BJP) wins the Lok Sabha elections, foreign investment (FPI) may return to Indian stocks. Nomura analysts estimate that their weekly investment in the debt market could be $1 to $2 billion by the date of inclusion in the JP Morgan index (June 28).
On the other hand, if the BJP fails to win the 2024 elections, Nomura fears a withdrawal of more than $30 billion of foreign investment in a few weeks. In such a situation, heavy intervention by the Reserve Bank of India (RBI) will be required. Nomura’s Nathan Sribalasundaram said in a recent note that the RBI has recently restored the increase in its foreign exchange reserves after the sell-off in April. However, this inflow is still low. This investment closely follows the capital account investment. FPI investment in equity and bonds is adding to it.
We think this fully reflects the election results. In case of BJP’s victory, we expect the dollar to come back and about $1 to $2 billion of investment is expected every week from the election to the date of inclusion in the index. According to Nomura, RBI may intervene in foreign exchange to increase interbank liquidity in the coming weeks. It says that this will be largely driven by the election results. Nomura said that in the last weeks, FPIs have resumed buying government bonds in small size.
