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After a week of directionless, range-bound trade, Indian shares rose sharply Friday after Indian news channels and Election Commission data indicated that the Congress party and its allies looked set to win elections in at least three out of five state assemblies.

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Trinamool Congress party supporters celebrated outside the residence of party leader Mamata Banerjee.

Such an outcome would give the Congress-led federal coalition more political heft to push through long-pending reforms in the financial sector and certain unpopular economic measures, analysts say.
The 30-share benchmark Sensex was up 1.1% in mid-day trade, easily outperforming major Asian markets.
Election results to the state assemblies of West Bengal, Tamil Nadu, Kerala, Assam and Puducherry are coming out Friday.
Markets don’t usually pay much attention to state elections as parliament legislates on most matters concerning the financial sector. But these are unusual times.
A series of bribery allegations has eroded the federal coalition’s credibility and hobbled the decision-making process. The winter session of India’s parliament stumbled into an impasse between the ruling coalition and the main opposition party because of disagreements over a parliamentary probe into allegations of illegal spectrum allocation in telecom bandwidth auctions in 2008.
Nobody expects the outcome of these state elections to alter the trajectory of the market in the short-term. Bleak fundamental factors such as rising interest rates, high raw materials costs and the prospect of slowing economic growth will continue to dominate sentiment.
However, the market has high expectations from the ruling coalition on the policy front, which could influence the long-term direction of the market. On May 18, 2009, the exchanges had to halt trading after shares skyrocketed on news that the Congress-led coalition, free of its Leftist allies, had held on to power at the Centre. Since then, the coalition’s progress has been slow and sporadic, but there are hopes that a strong showing in these elections will embolden the government and hasten the decision-making process.
The market’s wish-list is endless but there are some key items.
New legislation on land acquisition for public and private projects, which continues to be governed by a 117-year-old law, is sorely needed, say analysts. An insurance bill seeking to increase the investment limit of foreign companies from 26% to 49% is pending, while a proposed bill on how profits from mining should be shared with locals displaced by projects is also stuck.
Analysts say the coalition will also be in a position to take unpopular but essential measures that do not require change in legislation, such as raising diesel prices. The move might stoke inflation in the short-term but is crucial to reign in India’s burgeoning budget deficit, which is a key concern of foreign investors.

Fuente: India Real Time