Indian stocks surge after a decisive election result

Indian stocks gained 17% in a single day after national election results gave the ruling Congress Party a stronger mandate. This is the largest increase achieved in 24 hours for the benchmark BSE Sensex Index for almost twenty years. The Congress party has been leading a coalition government, and faced strident opposition from the Hindu nationalist BJP, as well as communist and caste-based opposition groups. The result means that Prime Minister Manmohan Singh should be able to press ahead with the reform agenda, in spite of the complexities introduced by India's system of proportional representation. The Prime Minister is a respected economist with a masters degree from Cambridge, a doctorate from Oxford and experience working as a governor at the International Monetary Fund.

Chris Palmer, Head of Global Emerging Markets at Gartmore Investment Management, believes the election result could lead to a step-change in the pace of reform. "As Finance Minister, Manmohan Singh oversaw a range of business-friendly reforms in 1991. We think that the next wave of change could be even more dramatic. There are some major regulatory issues on the table, including the caps on foreign direct investment that apply in industries like banking and telecoms. With an enhanced majority in the Lok Sabha, there may be scope for Congress to fast-track some much needed reform."

Gartmore's Global Emerging Markets Funds were overweight India before the extended voting period began. Recovery stocks added to the portfolio before election results were announced included the cement & industrial components producer Grasim, and India's largest listed real estate developer, DLF. Shares in both have appreciated sharply following the result.