India’s markets surge after election victory

The Indian authorities had to halt trading in the country's stock indices, after its benchmark Sensex Index jumped over 10 per cent today. Investors were celebrating the election victory of Prime Minister Manmohan Singh and his Congress party, hoping that it would mean he would be free to implement key reforms and give a boost to the economy.

The stop in trading was the first ever and lasted for two hours, after Singh's ruling Congress party took its biggest number of seats for eighteen years. The victory means the party will be able to form a new government immediately, without the support of communist administrators, who had previously blocked plans to increase foreign investment and carry out privatisations.

The country's currency also surged on the result, with the rupee advancing over two per cent against the dollar for its biggest gain in more then ten years. Bonds too jumped, with the yield on the most widely-traded issue, expiring in February 2019, dropping 15 basis points. ICICI Bank, India's second-biggest bank, added 18 per cent, while Tata Motors, owner of Jaguar Land Rover, moved ahead 13 per cent on the day.

The election result cheered analysts who watch the Indian markets, with many forecasting a bull market in the country’s stock market, particularly in shares representing its domestic industries. It also came at a key moment, as Sri Lanka celebrated victory over the Tamil rebels in its long-term civil war.

WHAT THEY ARE SAYING
Editorial, FT: "India's voters, 420m of them, have delivered a humbling lesson in democratic wisdom that could be just what their barely governable country needs. Faced with the fall-out from the financial crisis and a massive backlog of structural reforms, a tense stand-off with arch-rival Pakistan and a string of home-grown insurgencies, along with communal, caste and regional polarisation, the electorate has chosen decisively. The government of Manmohan Singh has triumphed beyond its supporters’ wildest expectations, to give India a stable and secular majority. This is the first time since 1977 that Congress, the party of independence, has been returned for a second successive term."

Madhusudan Kela, head of equities at Mumbai-based Reliance Capital Asset Management, on Bloomberg.com: "The election result is extremely positive and very, very bullish. This will provide a government which is stable and has powers to take decisions. Bull markets are back, unless we see complete chaos in global markets. India will outperform over the next one to three years." ·