India's stock markets could turn choppy, tracking the fallout of the results of the country's general elections, dealers said. Investors and funds could become jittery if neither of the country's two main political parties are able to find allies to form a majority government. Analysts are worried that a fragmented coalition could emerge which may not last the full five-year term.
For the week to May 15, the benchmark 30-share Sensex index rose 2.5 percent or 296.99 points to 12,173.42, its tenth straight week of gains. India's markets, which are at a six-month high, have risen by 51.2 percent from a recent low of 8,047.17 on March 6 on fresh buying by overseas and local funds which believe the global financial crisis is easing. Investor sentiment has improved on better-than-expected fourth-quarter corporate earnings from Indian companies. "Foreign funds bought on expectations the elections results (due Saturday) would not spring a negative surprise," said Alex Mathew, head of research at Geojit BNP Paribas Financial Services. "Firm European markets and the US index futures market fuelled the uptrend," he added.
Foreign funds have bought equities worth 1.92 billion dollars this year after selling shares worth 2.75 billion dollars during the same period last year. In 2008, risk-averse overseas funds sold Indian stocks worth 13.13 billion dollars as they repatriated funds to meet financial obligations and sought safer investment havens as the world economic slump deepened.
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