Indian shares soar on election victory
Indian shares leapt more than 17% in minutes after the pro-business Congress party won a decisive victory in national elections.
The country's Sensex index jumped 17%, or 1,306 points, to 14,272, forcing the Bombay Stock Exchange to shut down for the day.
It gave a boost to UK companies with links to the sub-continent. Vedanta Resources, India's biggest copper and zinc producer, shrugged off a mining sector sell-off to trade up 89p to 1405p in London, while Cairn Energy, the oil explorer with assets in India, put on 118p to 2454p.
The biggest winner was the FTSE 250-listed JP Morgan Indian Investment Trust, a mutual fund, which gained almost 76%, leaving it 46p higher at 106.25p.
Analysts suggested the strong Congress victory gives the party a solid mandate to continue reforms that have boosted Indian economic growth.
The broader Nifty index, traded on the National Stock Exchange, also rose 17%, up to 4,308, while the Indian rupee jumped over 2% to 48.32 a dollar, its biggest gain since 1998.
'We believe the election verdict could be game-changing for India, as it enhances the scope for significant medium and longer-term reforms that will boost the sustainable growth,' Rajeev Malik, a Singapore-based economist at Macquarie Securities, told Reuters.
'This, combined with the ongoing improvements in the Indian economy, will be highly positive for the economic outlook,' he said.
Morgan Stanley said the BSE index could rise another 10% by the end of the year because Indian companies would benefit from the election victory. It raised its end-2009 target for the index to 15,300 points.
'We, now believe, that there is greater probability of our bull case rather than our bear case,' analysts Ridham Desai and Sheela Rathi wrote in a note.
The communist parties, which had blocked reforms in insurance, pension funds and the selling off of state-owned companies, lost more than half their parliamentary seats.
The Sensex had climbed 26% already this year before the Congress Party victory was declared over the weekend. But it follows a slump in 2008. Shares in some emerging markets saw an even bigger sell-off last year than for those tracking Western economies. The Sensex peaked at more than 20,000 points in January 2008 before plummeting 60% to little more than 8,000 points two months ago.
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