Indian Stocks Jump Over 17% on Election Euphoria
India’s stock market surged more than 17 percent, forcing trading to close for the day, after the Congress Party’s definitive victory in national elections put to rest fears of an unwieldy coalition and set the scene for economic reforms.
Less than a minute after opening Monday, the benchmark Sensex jumped 1,305.97 points, or 10.7 percent, to 13,479.39, triggering a two-hour pause in trading. Within seconds of trade resuming it was 17.2 percent higher at 14,272.63, triggering the shutdown.
The broader Nifty 50 index rose 636.4 points, or 17.3 percent, to 4,308.05.
After month-long elections that ended on the weekend, the Congress Party alliance unexpectedly captured 261 seats in India’s 543-seat Parliament — one of the most crushing electoral victories in nearly two decades of fractious coalition politics.
The near collapse of India’s once powerful communist parties — which lost more than half their parliamentary seats — paves the way for long-awaited reforms in insurance, pension funds, banking and retailing. The Congress government may also sell some of its stakes in state-run oil, banking, and fertilizer companies.
The victory raised hopes of a revival in foreign direct investment and economic growth.
“FDI would have to be welcomed into India, like every other developing country,” P. Chidambaram, former Finance Minister and now Home Minister told reporters. “But FDI in a regulated manner,” he said.
Angel Broking managing director Dinesh Thakkar said investors, many of whom had been sitting on cash, welcomed the end to uncertainty.
“We will see lots of reforms and spending on infrastructure,” said Thakkar, who predicts a long bull run for the market.
“Compared to other emerging markets, we had underperformed by 25 to 30 percent because politics in India were unstable,” he said. “Now that there is no event risk and there is a strong government, we will catch up.”
In their euphoria, Indian traders shrugged off news of weak company earnings from the region, which dragged other Asian markets down Monday.
Japan’s Nikkei 225 stock index lost 213.25 points, or 2.3 percent, to 9,051.77 and Hong Kong’s Hang Seng slid 212.09, or 1.3 percent, to 16,578.61.
Despite the high sprits, even within India there are headwinds to change. Congress is unlikely to curtail costly social welfare programs which have added to the budget deficit.
The global financial crisis has already slowed the pace of some reform, as Indian authorities look with fresh skepticism on the wisdom of U.S.-style markets and regulation.
5/18/2009 3:10 AM ERIKA KINETZ AP Business Writer MUMBAI