India’s Sensex index hit an all-time high today as the country’s Congress party conceded defeat to frontrunner Narendra Modi.
The rupee also climbed and benchmark bond yields fell.
The Sensex spiked 6% to above 25,000 in early trading although by the time of writing profit taking had driven that back to a more modest 0.9% gain on the day.
While results from India’s massive weeks-long electoral marathon – the largest democratic vote ever - were continuing to roll, in Narendra Modi’s BJP appeared to hold a commanding lead in 275 seats with Congress ahead in just 49.
That share appeared to split 35% for the BJP versus 24% for Congress, a huge political shift.
‘The new government will without a doubt be in a stronger position to push through reforms than anyone had thought likely even a week ago,’ said Mark Williams of Capital Economics’ Asia team.
Given the enormity of the reforms required to turn around India’s slowing economy and persistent inflation, at least some of the gloss is likely to come off initial market jubilance soon however, warned BlackRock manager Sam Vecht.
‘While we retain a positive view for now, the appearance of excessive euphoria about India's short-term prospects would lead us to trim positions,’ he said.
‘Mr Modi's Indian election victory offers hope for major reforms, but the task that he and his BJP colleagues face is mammoth, and he will need to start delivering results very quickly if the wave of euphoria is not to founder,’ added Monument Securities’ analyst Marc Ostwald.
Indian GDP growth has effectively halved in recent years falling from 9.34% in 2010 to 4.57% last year, under what was widely perceived to be the ineffectual leadership of Congress.
Food and fuel inflation measures currently stand at 8.64% and 8.93% respectively.