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Polls win boosts Indian stocks

INDIA'S main stock index leapt more than 17 percent yesterday for its biggest single-day gain in almost two decades, after the ruling coalition sealed a decisive election victory that calmed fears of political uncertainty.

The rupee soared more than 3 percent to five-month highs against the United States dollar, its best one-day rise in more than a decade, and bond yields fell as the win boosted hopes a strong coalition would be able to push through economic reforms that would boost foreign investment.

Prime Minister Manmohan Singh's Congress-led coalition eyed possible new allies and needed just 10 seats for a parliamentary majority.

A strong coalition, free of the pressures from its former partners, has boosted the prospect of reforms to encourage growth in Asia's third-largest economy, according to analysts.

Investors cheered the victory by sending the market up nearly 15 percent within seconds of opening, triggering circuit breakers that halted trade for two hours.

A final circuit breaker was set off almost immediately after trading resumed, halting trade for the rest of the day. But overall volume was light at just 13.3 million shares, against a daily average of 400 million in 2009.

"Clients want to buy. They have nothing else to say," said R. Sriram, a technical analyst at ICICI Securities.

"There are still a lot of short positions pending. Investors will bang their boots and come in to cover them. There could be another circuit breaker," he said.

The 30-share BSE index jumped 17.34 percent, or 2,110.79 points, to 14,284.21, for its highest close since September 11. Trade was finally halted for the day before noon.

The day's percentage rise was the biggest since a 20.8 percent jump on March 2, 1992 when Singh, who was then finance minister, unveiled reforms that opened the economy to foreigners.

Morgan Stanley raised its end 2009 target for the BSE index to 15,300 points, a rise of 7 percent from current levels, saying Indian firms would gain from the election victory.

"We, now believe, that there is greater probability of our bull case rather than our bear case," analysts Ridham Desai and Sheela Rathi wrote.

Still, there were words of caution. "In the short-term, sellers will come in, as ultimately economics will have to come in play," said fund manager Jayesh Shroff.


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