Indian stocks surge to record high on Modi poised for victory

Mumbai: India's stock market jumped more than six percent to a record high of 25,000 points on Friday as business-friendly opposition leader Narendra Modi looked set for a landslide victory in national elections. The benchmark Bombay Stock Exchange index, known as the Sensex, rose 6.06 percent to 25,353.16 in morning trade as vote counting showed Modi and his right-wing party would vault to power.

"Markets are following indications that the Bharatiya Janata Party (BJP) and its allies will have a thumping victory. This is crucial for their ability to push key reforms," said Harendra Kumar, head of brokerage Elara Capital.

Banks were leading the gainers, with Canara Bank surging 21.57 percent to 406.60 rupees, followed by Andhra Bank, which jumped 16.17 per cent to 83.35 rupees. The rupee also surged 1.14 per cent to 58.52 against the dollar from its previous close of 59.29. The currency has been strengthening in recent weeks on expectations that Modi would win the marathon six-week election and introduce structural reforms to turn the economy around.

It has now risen 17.45 per cent since it sank to a record low of 68.85 in August with investors fretting about a fiscal deficit crisis and waning confidence as the government struggled to boost growth in the face of global economic turmoil.

Markets have risen 5.0 per cent in the past week as heady-many say unrealistic-optimism has returned after low business investment and economic growth, rising food prices and corruption. India's central bank said it has contingency plans ready to deal with any excessive volatility in the markets from the election results.

Reserve Bank of India (RBI) governor Raghuram Rajan said it has discussed plans with the finance ministry and the stock market regulator. "We are ready for any fallout with the change of the government. We are also ready for any volatility in the markets," Rajan said after the RBI's board meeting on Thursday. Modi looked set on Friday to sweep to victory in the national polls, riding a wave of public support for his message of jobs, development and revival of an economy that is growing at a decade low. Modi's BJP is heading for its best ever result in the parliamentary vote after 10 years of rule by the leftist Congress party and the Gandhi political dynasty.