Hello. It’s a pretty good day if your last name is Adani, because you just added $20,000,000,000 to your market cap. Voting has ended in India, with official results expected to be announced later this week. Indian equities, the rupee, and bonds rallied on expectations of a strong finish for Prime Minister Modi’s ruling BJP coalition.

We’ll talk markets, dive deeper into Adani Group, and then finish with a round-up of the most relevant headlines from the week.

BTW: Gautam Adani overtook Mukesh Ambani as the richest person in India (and Asia overall). Who is India’s third-richest person? (Answer at bottom)

Markets

Quick Appendix: NFTY is a weighted average of the largest 50 companies listed in the National Stock Exchange of India by market capitalization. FLIN, or Franklin TSE India ETF, tracks large and mid-cap companies, weighted by market cap, to give international investors exposure to Indian markets. MSCI EM is an index that captures large and mid-cap companies across 24 emerging market countries and covers 85% of the free float-adjusted market capitalization in each country. SP500 is the index of the 500 largest companies listed in U.S. stock exchanges by market cap. MSCI India is an index that covers 85% of the Indian equity universe. Data as of close of market Friday in India.

Exit Polls Predict Strong BJP Victory

India’s seven-phase elections have now come to a close, and the BJP and its ruling coalition is projected to win over 350 seats. As discussed last week, a BJP victory is considered bullish for the Indian economy, given promises of massive infrastructure spending that aims to turn India into a developed country by 2047.

On the heels of strong economic growth prints, 8.2% for the fiscal year ending March, the NSE Nifty 50 surged 3.3% last night, the largest single-day growth in three years. The index has reached its highest-ever point, and with retail investors pouring future contracts into the country’s still developing but highly saturated derivate markets, Indian money is more bullish than ever.

Exit polls have just been released this weekend before official results which can make them slightly inaccurate. But, historically, the BJP has actually been undercounted. Consensus in 2014 was 280 with 336 seats won and 2019 was predicted at 330 seats with 352 realized. 

Adani Group Jumps $20 Billion

Adani Group, led by billionaire industrialist Gautam Adani, which operates ten publicly traded companies, collectively saw its valuation grow by $20 billion overnight on news of a strong BJP re-election. The conglomerate has now nearly returned to pre-Hindenburg levels, restoring Gautam Adani as Asia’s wealthiest person.

Such events bring forth important questions about PM Modi’s corporate favoritism. Modi and Adani are known allies; Modi was a guest at Adani’s son’s wedding and has been seen traveling to campaign events on Adani’s private jet. But the helpful relationship goes further.

Modi’s government removed the condition that a single company could win contracts to build more than two airports domestically, allowing them to hand all six of the airport building contracts in 2019 to Adani Group. The Economist reports Adani Group “now runs some of India’s biggest ports, stores a third of its grain, operates a fifth of its power-transmission lines and makes a fifth of its cement.” Adani Group has been a beneficiary of food subsidies and coal mining contracts. The closeness of Adani and Modi was so well recognized prior to Modi’s ascent to national office that upon the election of Modi to Prime Minister in 2014, a subsidiary of Adani Group’s stock immediately jumped by 23%.

Adani, hailing from Prime Minister Modi’s home state of Gujarat, has witnessed his net worth skyrocket by an astonishing 2,500% since Modi assumed office. This meteoric rise underscores Adani’s pivotal role in actualizing the BJP’s ambitious infrastructure vision, spearheading projects that span ports, airports, transportation, energy, concrete, and beyond. 

Adani’s next step may be in digital finance with a potential Paytm (NSE: PAYTM) acquisition. Paytm, notably, has also been instrumental in Modi’s policies expanding access to digital payments. Paytm offers digital payment and financial services in India, now becoming so ubiquitous that even rickshaw drivers utilize it for payments. Now Paytm’s market cap is around 230 billion rupees, or $2.77 billion. Rumors are swirling around a potential Adani-led 15,000 crores ($1.8 billion) investment made in Paytm, not to mention Adani Group leaders meeting with Paytm CEO Vijay Shekhar Sharma.

Macro

India’s Growth Tops 8.2% in Fiscal Year Ending March (BBG)

• Gross Value Added (GVA), which some economists consider a more accurate measure of productivity in India due to GDP being skewed by government subsidies and indirect spending, rose by 6.3% in the first quarter compared to the same period the previous year.

• The divergence between GDP and GVA has been a point of concern and continues to grow

• First quarter growth:

  • Manufacturing rose 8.9%

  • Farming grew 0.6%

  • Services grew 5.1%, down from 6.9% in the previous quarter

  • Private consumption grew 4%

  • Growth investment came to 6.5%, down from 9.7%

Federal Spending Lower Than Allocated (BBG)

• The deficit for fiscal year ending March was lower than expected at $198 billion (16.54 trillion rupees), 95.3% of the estimated

• The Indian government spent $504 billion (41.9 trillion rupees) in 22-23 fiscal year

RBI Unlikely to Slash 6.5% Repo Rate (general rate of borrowing) Unlikely to be Slashed (ET)

• High GDP growth of 8.2% YoY with sticky inflation in food prices makes cuts less likely

RBI Sets Record Trade Surplus of $25.3 Billion (2.1 Trillion Rupees) Amid Q1 Economic Growth (Reuters)

India May Ease Food Tariffs and Embargos, Providing World Crop Markets Relief (BBG)

• Keeping with India’s highly protectionist culture around agriculture, the government has kept sugar and some types of rice off global markets to protect domestic supply during elections.

  • Such measures have caused crop prices to rally in recent months

• Protectionist measures include: 

  • Broken and white rice exports banned, 20% tax on parboiled rice for foreign buyers

  • 40% duty on wheat

  • Sugar exports are capped at 6 million tonnes for the 22-23 year, down from 11 the year before; this year quota’s is yet to be announced

Goldman Sees India’s Stocks, Bonds and Rupee as Top Emerging Market Picks (BBG)

Equities

India Stocks Hit Record 3.3% Single-Day Growth, Highest in Three Years, Rupee Gains as Polls Predict Modi Win (BBG)

The NSE’s India Volatility Index, a measure of 30-day implied swings based on options prices, nosedived 15% to a two-week low (BBG)

India Derivatives Market Enter Most Bullish Period Ever (BBG)

• Local investors added more than 100,000 long contracts in index futures on Thursday

• However, Foreigners have sold $3.1 billion of stocks, increasing net outflow to $4.2 billion for the current quarter

All 10 Adani Stocks Jump a Total of $20 Billion on Signs of Landslide Win for Modi (BBG)

• Adani Group posted a ‘Monstrous’ 45% increase in EBITDA (Business Standard), driven by consolidation and strong acquisitions

India Bankers Predict IPO Surge as Election Uncertainty Lifts (BBG)

• India’s IPOs this year have raised $3.9 billion, more than double during the same period in 2023, and higher than South Korea and Hong Kong

India’s Jindal (NSE: JINDALSTEL) Is Said to Join Venezuelan State Oil Venture (BBG)

Credit

Bonds and Rupee Poised to See Further Upside Following Exit Polls (Mint)

• The expected BJP victory boosts credit and the rupee as both (India being a developing economy) hinge on future expected growth rather than stability

• Higher-for-longer rates could see foreign investors snapping up bonds at an attractive 6.5% yield

S&P Upgrades India to ‘Positive’ from ‘Stable’ While Retaining a Near-Junk Bond Status of BBB- Rating (Reuters)

• Robust economic expansion in the face of stagflation across the globe led to a positive sentiment

• In the future, analysts will look to continued growth, improvement in the quality of government spending, and political commitment to fiscal consolidation

RBI May Lift Ban on Distressed Debt Buyers From Purchasing Equity Stakes (BBG)

Politics

Exit polls show Modi clinching a historical third term (BBC)

• Relatively high unemployment, inflation, and government programs were on the top of voters’ minds

• India’s electorate was comprised of a record-breaking 968 million voters

India’s Opposition Leaders Challenge Exit Polls Credibility (BBG)

• Rahul Gandhi, an Indian National Congress leader challenging Modi’s re-election, said exit polls “were in favor of Modi and they were a fantasy.”

• Press Trust of India reports prominent politician and West Bengal Chief Minister Mamata Banerjee said exit polls showing favorable election outcomes for Modi had been “manufactured and have no value.”

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Oh, and India’s third wealthiest person is Shiv Nadar, founder and CEO of the IT company HCL Technologies, who has a net worth of around $30 billion.

See you next week.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

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