How instructive to watch the cold, ruthless logic of the market at play around the Indian election. It turns out that investors are ready to dump the juicy equity and bond paradise that Modi lifted to the stratosphere – stock market reached record levels, briefly overtaking Hong Kong’s earlier this year as the fourth largest in the world – if BJP falls short of its own boast of “abki bar, char so par”!

In fact, smart money has already been scaling down Indian market exposure amid low voter turnout and signs of BJP’s failure to break into traditionally unwelcoming southern states like Kerala and Tamil Nadu and, more seriously, rumours that all is not well in the “Hindi belt” stronghold either.

Foreigners pulled $3.5b from local shares in May alone as part of the bigger $6.3b stock and bond market rout for the quarter. And it says a lot that the market’s fear barometer, the India VIX Index – a gauge of likely market swings over the next 30 days – has already doubled from its April low.

Implied volatility in the one-month period........

© Business Recorder