FxWirePro: Traders play ‘buy the rumor, sell the news’ on BJP’s election victory

Vote count is on progress in the world’s largest democracy, and outcome so far convincingly suggests that the incumbent Bharatiya Janata Party (BJP) led by Prime Minister Narendra Modi is set for yet another election victory, which is almost as decisive as the 2014 election, where BJP alone without its traditional partners within the National Democratic Alliance (NDA) secured outright majority.

• Counting is still in progress, no result has been announced yet. According to the latest, BJP leading in 286 seats, more than the magic number of 272 for an outright majority. The main rival Congress Party leading in just 54 seats, while regional parties are leading in 242 seats.

Traders in the Indian markets are playing the classic ‘buy the rumor and sell the news’ strategy.

• The Indian rupee has retraced all of today’s gain and the price action has so far formed a Doji candle. USD/INR retreated from the weekly low around 69.35 per USD area, made on Monday after the exit polls predicted a sweeping BJP victory. The exchange rate is currently at 69.71 per USD. Today’s price action suggests that this event could trigger a reversal going ahead.
• Similarly, India’s benchmark stock index Nifty50 is also signaling the possibility of a short term trend reversal. The nifty50 index is trading at 11800 area, up 0.5 percent for the day, but down around 240 points from today’s peak.

Weakness in the global stock market and stronger USD are contributing to the fall.