India Seeks Stability Amid Global Economic Turmoil

India's benchmark index had a historic rally on Monday as the ruling Congress-led coalition sealed a decisive victory in the general elections, easing concerns of political instability and inspiring hopes of speedy economic reforms.

Bombay Stock Exchange's key Sensitive Index (Sensex) shot up more than 2,111 points, or more than 17% after opening on the first day of trading after the election results were announced over the weekend. The move was so large that the bourse had to close for the day after being halted once for hitting the ceiling for a daily rise.

Indian companies such as Infosys Technologies Ltd. (IFNY - Analyst Report), Tata Motors (TTM - Snapshot Report) and Satyam Computer Services (SAY - Analyst Report) all joined the upswing.

 Exchange-traded and closed-end funds like WisdomTree India Earnings Fund (EPI), Morgan Stanley India Investment Fund Inc. (IIF) and India Fund Inc. (IFN) were in on the action too, scoring big gains in their own respect. The Indian rupee also gained more than 3% against the dollar, its best intraday performance in more than a decade.

The clean sweep of the United Progressive Alliance (UPA), led by the Congress party, cheered investors for numerous reasons. For one, the government would now have the flexibility to introduce economic reforms without hindrance from former communist allies that did not favor privatization, standing in the way of altering outdated labor laws. Some voters also believe that Prime Minister Manmohan Singh, a much respected economist himself, would be the best person to steer India out of the worldwide financial crisis.

India's growth has slowed significantly following the global economic meltdown, but many citizens, especially in the rural areas, remain unaffected by international developments. While the Congress party's welfare programs like the National Rural Employment Guarantee Scheme promise state-funded jobs to the rural unemployed, Mr. Singh's appeal for "inclusive growth" to unite the slumdogs with the millionaires drive home the UPA's success story.

However, economic development in India has the reputation of taking ages to materialize, no matter which party is in power. While winning the elections is definitely a landmark in his career, Mr. Singh now faces the tough task of innovating productivity-enhancing reforms that could help him live up to popular expectations of stimulating growth in spite of the global economic slump.