Indian stock benchmarks surged more than 17% Monday as investors cheered a decisive election victory by the Congress Party-led coalition, with trading halted and then suspended for the day as the deluge of buy orders trigged market circuit-breakers.
Other stock markets in the region ended mixed, in part because India's surge helped turn around sentiment; markets that closed earlier such as Japan ended in the red, while later exchanges like China ended higher.
"The election in India is showing a clear mandate there, and probably underlines to a lot of investors there that Asia is going to be the growth area for the next six to nine months, whereas growth in Europe and U.S. could take much longer," said Andrew Sullivan, a trader at Main First Securities in Hong Kong.
Minutes after the opening, the the 30-stock Sensitive Index, or Sensex, rose 10.7% while the National Stock Exchange Nifty rose 14.5%, triggering a two-hour trading suspension. Immediately at the resumption of trade, they surged further, prompting a trading suspension for the rest of the day. The Sensex closed 17.3% higher at 14284.21, while the 50-stock S&P CNX Nifty rallied 17.7% to 4323.15.
"A pro-reform/stable government is just what India needs, amid signs of economic expectations bottoming out, to inspire investor confidence. We have argued that the stability of the newly-elected government, rather than the coalition dynamics, would be crucial for" sentiment, said analysts at Standard Chartered.
Some participants and analysts were disappointed. Sharmila Joshi, an investment adviser in Mumbai, said "I have never seen anything like this… These kind of gap-up openings are ultimately bad for the market, as they don't give one a chance to participate. Today, it was impossible to participate."
Among the big gainers, shares of market heavyweight Reliance Industries climbed 20.6% and ICICI Bank advanced 25.4%, while property major DLF gained 25.9%.
The local currency also surged, with the U.S. dollar recently down to 47.96 rupees from a previous close of 49.38 rupees.
Morgan Stanley raised its earnings estimate and Sensex targets after the poll outcome. Analysts there said they now expect the Sensex companies to post aggregate earnings growth of 2.5% this fiscal year, compared with a prior forecast of a 10% contraction. It raised its Sensex target for 2009 to 15,300.
Saturday, the Congress-led United Progressive Alliance secured 262 seats out of the 543 up for grabs, falling just short of the 272 majority mark but expected to muster that with support from smaller parties and independents. The outcome beat the most optimistic exit polls.