Rupee, Sensex rise on prospects of BJP wins in state polls

The rupee rose to a five-week high against the dollar and stocks jumped more than 2 per cent to near record highs this morning as exit polls predicted a strong showing for the Bharatiya Janata Party, the main opposition party at the centre, in the recent state elections in five states.

Confirmation of a strong showing by the BJP when results are out on Sunday would be seen as bolstering its chances of its victory in general elections due by May.

The BJP and its prime ministerial candidate Narendra Modi are perceived by many investors in India as being more business-friendly than the Congress-led UPA government, and willing to undertake reforms to tackle an economy growing at its slowest in a decade.

Recent data signal that the economy may be bottoming out while the current account deficit has shrunk, adding to optimism in Indian markets despite concerns about a potential tapering in the US Federal Reserve's monetary stimulus.

Opinion and exit polls have a patchy track record in India. Most surveys forecast the wrong outcome in the 2004 general election.

The rupee rose to as high as 61.52 against the dollar, its strongest level since 31 October. It was last trading at 61.56/57 compared to its 62.05/06 close on Wednesday.

The Bombay Stock Exchange's Sensex rose as much as 2.2 per cent to a session high of 21,165.60 points, approaching a record high of 21,321.53 points hit on 3 November.

The strong showing bucked the trend in Asian shares, which continued to be hit by worries of an early drawdown of U.S. stimulus.