By Swati Bhat, Savio Shetty and Arnab Paul
MUMBAI/BENGALURU (Reuters) - Indian equities, rupee and bonds are set to rally on Monday after almost all exit polls suggested that the Prime Minister Narendra Modi-led National Democratic Alliance (NDA) was likely to secure a clear mandate at the 2019 national elections.
"The market was working with the assumption that the NDA would need to ally with other parties to form the government. To the extent the exit polls are predicting an outright victory for the NDA, we could see a 5-10% equity market rally in the coming weeks," said Saurabh Mukherjea, founder of Marcellus Investment Managers.
Votes are set to be counted on May 23 and exit polls suggest a better showing for the NDA than what was expected in recent weeks.
The NDA is projected to win 287 seats in the 545-member lower house of parliament followed by 128 for the Congress party-led opposition alliance, the C-Voter exit poll showed.
To rule, a party needs the support of 272 lawmakers.
Investors expect the Nifty to break the resistance seen at 11,800 levels and possibly surge to 12,200 in coming weeks provided the actual results are in-line with the exit polls.
The broader NSE index ended 1.33% higher at 11,407.15 on Friday, while the benchmark BSE index closed up 1.44% at 37,930.77. Both indexes gained over 1% for the week.
Jagannadham Thunuguntla, senior vice president and head of research at Centrum Wealth Management said the likely "continuation of policies and reforms is an added comfort," for the markets.
Investors expect another 2-3% rally possible in the stock market over the next 3-4 days, but said further moves would depend on the actual election outcome and fundamentals.
"If the NDA's numbers cross 300, then the rally will continue beyond May 23," said Mayuresh Joshi, Senior Vice President and fund manager at Angel Broking, adding factors such as the liquidity situation, corporate earnings and global worries, may rein in the upside.
BONDS AND RUPEE
"The underlying backdrop for bonds has been bullish with a soft growth versus inflation trade-off both globally and locally," said Suyash Choudhary, head of fixed income at IDFC Asset Management.
Choudhary said a stable government that helps preserve India's risk perception would help the Reserve Bank of India respond decisively to the underlying macro dynamic.
"We expect this decisiveness to first reflect in a more proactive liquidity stance. This will be more bullish for bonds than merely a rate cut".
On Friday, the benchmark 10-year bond yield closed at 7.36%, down 2 basis points from its Thursday's close. It is expected to open around 7.32% on Monday.
The partially convertible rupee had closed at 70.22 per dollar on Friday versus its previous close of 70.0350.
The rupee is expected to stay between 69-72 per dollar levels in the near-term but could open around 69.70 levels on Monday and hold in a 69.50 to 70.20 range, traders said.
"After the initial move, however, markets will focus on the fundamentals. Sanity would prevail rather than emotions," said Swarup Mohanty, CEO at Mirae Asset Global Investments in India.
(Reporting by Swati Bhat, Savio Shetty, Abhirup Roy, Chris Thomas, Nivedita Bhattacharjee, Arnab Paul, Divya Chowdhury and Chandini M; Editing by Euan Rocha and Louise Heavens)