Congress alliance victory should boost India stocks

New Delhi: A sweeping victory for the Congress party-led coalition in general elections will erase political risk concerns and set the stage for a strong surge in Indian shares, especially in sectors related to infrastructure, consumption and finance.

Belying exit polls and widespread speculation of a fractured mandate, the ruling Congress alliance decisively beat its main rival, the Bharatiya Janata Party-led group, and delivered a serious blow to the communists, raising expectations the next government would have a freer hand to push reforms.

"This is a decisive verdict," Nandan Nilekani, chairman of Infosys Technologies, told a TV news channel. "The message here is get on with bold steps, bold reforms; there are no more shackles on you."

The results, released on Saturday after month-long elections, will cheer the stock market when it opens for trade tomorrow, analysts said.

"There will be a big durable rally now," said Samir Arora, Singapore-based chief of Helios Capital. "It will be a fast rally on the back of desperation among foreign investors who had missed out."

The top-30 Sensex has risen for 10 consecutive weeks, its longest winning streak in two-and-half years, gaining more than 50 per cent from its March low, and is up 26 per cent this year after slumping 52 per cent in 2008.

It rose 2.5 per cent last week to 12,173.42, its highest close in more than seven months.

"The market should open gap up 700-800 points on Monday," said equity trader Kevin D'Souza. "People who were sitting on the fence are going to jump in. There will be a lot of incremental money coming in."

The 10-week rally was triggered by a global revival for risk appetite, but the pace of the market's rise had slowed over the past two weeks on worries about the political uncertainties.

With the elections providing a clear verdict, the Sensex should now trade between 12,000 and 16,000, Manish Chokhani at Enam Securities told CNBC-TV18.

- The writer is a journalist based in India.