India stocks surge as Modi seen closing in on power

NEW DELHI, India – Indian stock markets surged to record highs Tuesday, May 13, on hopes of a business-friendly government under Hindu nationalist Narendra Modi as polls showed him closing in on victory in the world’s biggest democracy.

“Modi at Delhi Gate” said a headline in the Mail Today, while the Hindustan Times read simply “Exit Polls: Enter Modi” after a flurry of surveys released after voting ended Monday pointed to a decisive result.

All the forecasts showed Modi’s right-wing Bharatiya Janata Party (BJP) and its allies trouncing the left-leaning Congress party which has been in power for a decade, and most indicated they would seal a majority.

Results are due on Friday, with some still cautioning against over-confidence in a BJP victory given notorious forecasting errors in the last two general elections.

Reacting to the end of 5 weeks of voting that saw record turnout of 551 million people, US President Barack Obama pledged to work closely with the new Indian government.

Obama said India had “set an example for the world” as he hailed the contest as “a vibrant demonstration of our shared values of diversity and freedom.”

“We look forward to the formation of a new government once election results are announced and to working closely with India’s next administration to make the coming years equally transformative,” he added.

Modi’s election would present a headache for the US, which refused to deal with him for years in the aftermath of religious riots in the state of Gujarat in 2002 shortly after he became its chief minister.

More than 1,000 people, mostly Muslims, were killed in the violence which critics say Modi did little to stop, even though he has been cleared of involvement by the courts.

Washington only ended its boycott of Modi in February when Nancy Powell, the outgoing US ambassador to India, met him for talks in Gujarat.

European countries also refused to deal with him for years in the wake of the 2002 riots, for which Modi has refused to apologize.

Stocks race higher

Foreign and domestic investors have few misgivings about his past, however, and appeared in no mood to heed the warnings about unreliable pollsters.

“The expectation is that (the BJP alliance) will get to form the government comfortably and even if they need more allies they will not present a stumbling block for reforms,” Harendra Kumar, head of Mumbai-based brokerage Elara capital, told the Agence France-Presse.

The Bombay Stock Exchange index, also known as the Sensex, showed gains of 1.90 percent at a new high of 24,000.93 in late morning trade, surpassing Monday’s record peak of 23,572.88 points.

The Sensex has now gained more than 22% since the BJP chose Modi as its prime ministerial candidate in September.

Monday’s gains came despite new data showing that industrial production shrank in March for the fifth time in 6 months, underlining the scale of the challenge for the next government in reviving growth.

Modi has largely steered clear of Hindu nationalist rhetoric on the campaign trail, promising to concentrate on development by rolling out the red carpet to companies and restore badly battered business confidence.

His top aide predicted that the margin of victory on Friday would be even wider than forecast when the results are announced, while emphasising that BJP was open to forging new alliances.

Defense of Rahul Gandhi

While a sweep by the BJP had been expected, the apparent scale of defeat for Congress was still striking with exit polls showing support for the party which has ruled India for most of the post-independence era at a historic low.

Party leaders have dismissed the surveys and remain defiant in public, insisting that Friday’s results will surprise the pollsters and hand the Congress-led alliance a third term in power.

They have begun rallying around Rahul Gandhi, the latest generation of the Nehru-Gandhi political dynasty who has led his first national election campaign – widely panned as lackluster and uninspiring.

Congress spokesman Shakeel Ahmed said that party president Sonia Gandhi, Rahul’s mother, as well as local Congress leaders had fought the election together and shared the responsibility for the outcome.

“It is all collective,” he said.

Congress has suffered a backlash after a spate of corruption scandals which plagued outgoing Prime Minister Manmohan Singh’s government since he was re-elected in 2009.

An editorial in Tuesday’s Indian Express said that Singh’s “second term was marked by a tangible and growing disenchantment of the people.” – Rappler.com