Lok Sabha poll results: Foreign institutional investors splurge on ETFs to buy Indian equities

Ahead of the Lok Sabha poll results, investors have poured money into Exchange Traded Funds (ETF) that buy stocks of Indian companies. Foreign institutional investors have also significantly invested in Indian equities in both cash and derivatives markets on Monday.

This comes as most of the exit polls on Saturday predicted that Prime Minister Narendra Modi will retain power for a third straight term, with BJP-led NDA winning anywhere between 350-401 seats.

Surge in ETFs investment

As per Bloomberg, India recorded the biggest inflow of $307.5 million across emerging markets for the week ended May 31. This was led by iShares MSCI India ETF garnering $192.9 million followed by the WisdomTree India Earnings Fund that pulled in $82.6 million.

Foreign Institutional Investors by buying over 1.2 lakh index futures increased their long-short ratio from 14% to 28.26%. The long-short ratio represents the amount of a security available for short selling versus the amount actually borrowed and sold.

As per Moneycontrol, the shift came amid robust short covering on June 3, following exit polls results that was released on Saturday. On Monday, the Indian benchmark indices opened at a record high. At the close both sensex and nifty surged over 3%.

Bloomberg quoted Ashish Chugh, head of global emerging-market equities and a portfolio manager at Loomis Sayles & Co and said that if Modi secures another win, markets expect the government to push through policies that could further boost India’s economic growth, which is already among the world’s fastest.

“If the exit polls are correct, the margin of victory for the BJP led NDA alliance should be quite strong,” Chugh told Bloomberg. “This implies a continuation of Modi’s pro-growth, investor-friendly policies which has made India one of the best equity markets globally over the past decade since Modi came to power.”

Also watch: Sensex and Nifty surge over 3% to record highs as exit polls predict major BJP-led NDA victory