Avinash Vazirani, manager of the Jupiter India Fund, comments on the results of the Indian elections:

"Exit polls for India's elections have proved about as accurate as BBC presenter Michael Fish's weather forecast in October 1987. Contrary to polling indicators, the ruling Congress party has taken the largest number of seats by a single party since 1991. Meanwhile, the Communist party has seen its lowest share of the vote since India achieved independence 62 years ago.

"As we predicted in an earlier note, the biggest parties have grabbed a larger share of the vote and smaller players have lost out. The key to success has been good governance at state level. Where parties have governed well, they have been awarded votes. This contrasts with previous elections, in which religious and caste allegiances have determined the outcome. In effect, this has been a great victory for the Indian democracy.

"So what will it mean for investors? It should provide stable government for the next five years and allow the majority-led coalition to push through reforms previously delayed by the minority parties, in particular, the Communists. It should also increase the likelihood of the government selling more stakes in state-run companies to private investors. 

"All this should be hugely positive for India - the market responded to the news by rising 17% before trading was suspended. Unlike other parts of the world, Indian economic fundamentals are supported by domestic demand. Therefore, a reinvigorated drive for reform could see better-than-predicted GDP growth. Currently predicted at 5% to 6% for this year, we believe it could well reach 7%. Moreover, domestic mutual funds and foreign institutions have been generally underweight Indian equities. The amount of investor cash sitting on the sidelines could therefore provide additional support to the market." 

NOTE

Jupiter Unit Trust Managers Limited (JUTM) and Jupiter Asset Management Limited (JAM) are both authorised and regulated by the Financial Services Authority and their registered address is 1 Grosvenor Place London SW1X 7JJ. They are both subsidiaries of Jupiter Investment Management Group Limited and the group is collectively known as "Jupiter". The above commentary represents the views of the Fund Manager at the time of preparation and may be subject to change and this is particularly likely during periods of rapidly changing market circumstances. Their views are not necessarily those of Jupiter and should not be interpreted as investment advice. Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given.