India ~ an Election in the Balance

Nomura releases research report on the macro and market implications of the upcoming Indian election

India, April 2, 2009 – Nomura, the pre-eminent Asian-based investment bank, has released the first comprehensive analysis by a major research house on the impact of the upcoming Indian election on India's economy, equity markets and currency.

The analysis, published in the report, An election in the balance: Macro and market implications, concludes that much is riding on the election outcome: persevering with economic reforms is key if India's economic take-off over 2004-07, is to resume.

The report concludes:

Economy - In Nomura's opinion, India's structural economic take-off story, which was becoming evident before the global recession hit, still remains valid, provided the new government continues with incremental economic reforms. Whatever the result, however, the key challenges facing the incoming government are to introduce macro policies to revive the economy and instill investor confidence; fiscal prudence and being able to garner the support necessary to push reforms through what is likely to be another disparate coalition.

Equities – the likelihood of a post election rally is small except if there is a single party in a dominant position in government. On the flip side however, the equity markets are unlikely to undergo a correction on the outcome.

The Rupee - Barring any pre- or post-election shock (at least immediately after the election), Nomura believes the INR should appreciate to 49.0 vs USD (end 2Q). Nomura highlights the support from favourable INR FX valuations, a raft of capital inflow liberalisation policies and an improving current account position.

Political winners and losers

In the face of considerable uncertainty, Nomura judges the possibility of the election resulting in a government that can push through further reform as finely balanced. Nomura considers four possible political outcomes:

An INC-led government which is not dependent on support from the communists;
A BJP-led government which is not dependent on support from the communists;
An INC-led government beholden to the Third Front/communists;
A Third Front-led government.

Either of the first two above outcomes, in Nomura's opinion, offers the better prospects of a stable government capable of persevering with incremental structural economic reforms. The latter two outcomes would not be conducive to significant reforms.

Ends

For further information please contact:


Name	Company	Telephone

Matthew Russell	Nomura	852 - 2252 - 6014
Anne Lui		852 - 2252 - 6451

Nomura

Nomura is a leading financial services group and the preeminent Asian-based investment bank with worldwide reach. Nomura provides a broad range of innovative solutions tailored to the specific requirements of individual, institutional, corporate and government clients through an international network in over 30 countries. Based in Tokyo and with regional headquarters in Hong Kong, London, and New York, Nomura employs about 26,000 staff worldwide. Nomura's unique understanding of Asia enables the company to make a difference for clients through five business divisions: retail, global markets, investment banking, merchant banking, and asset management. For further information about Nomura, please visit www.nomura.com.