Indian shares surge over 10 percent

May 18, 2009
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, MUMBAI, May 18 – Indian shares surged more than 10 percent on Monday, cheered by the Congress-led alliance\’s clear election victory, which dealers said paved the way to revived growth and vital economic reform.

The benchmark 30-share Mumbai stock exchange surged 10.73 percent, or 1,305.97 points, to 13,479.39.

Trading was automatically halted for an hour, after the sharp rise triggered circuit breakers set to cool down the market.

"This was the big bang event that investors were looking for. Political uncertainty has completely eased with the Congress party emerging as the single largest party," said Hitesh Agrawal, head of research with Angel Broking.

"We expect the government to have greater flexibility to boost economic reform and growth from here on," he said.

Confounding expectations of a close result and a fractured parliament, the alliance won a projected 260 seats at the weekend — a mandate nobody had predicted when voting began last month.

"The most positive news from the elections is that the roadblock to reforms — the communists parties — were trounced," said Apurva Shah, head of research with brokerage Prabhudas Lilladher.

Fund managers expect the markets to surge by another 20 percent in coming weeks, against a backdrop of better-than-expected fourth quarter corporate earnings, which ended March.

The Sensex has already risen more than 50 percent from its low of 8,079 in early March, on signs of the global downturn easing.

"We expect to see reforms in the financial sector and pension funds and privatisation of state-run loss-making firms, which was on hold all this while," said Anand Mahajan, executive director (business advisory) with KPMG.

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