Updated: 12/09/2013 13:23 | By Agence France-Presse

Indian shares and rupee rally after opposition party victory

Indian shares hit a record high while the rupee and bonds rallied on Monday after the main opposition Bharatiya Janata Party, widely seen as business friendly, recorded a string of victories in state elections.

Indian shares and rupee rally after opposition party victory

Indian Hindu nationalist opposition Bharatiya Janata Party candidate Kailash Bhanshali gestures to supporters after winning in the Rajasthan state assembly election in Jodhpur on December 8, 2013

The party's success has raised hopes among investors that it could come to power with decisive strength in India's general election May and introduce pro-market reforms that could boost ailing economic growth.

The benchmark 30-share Sensex index jumped 2.32 percent to 21,483.74 in early trade, beating their previous all-time high of 21,321.53 seen on November 3.

The rupee also strengthened against the dollar to 60.84, its strongest level since August. It had closed on Friday at 61.42. Benchmark 10-year bond yields eased four basis points to 8.81 percent.

"The markets have risen on the hope that the BJP can come in with decisiveness in the general elections in May," said Sonam Udasi, head of research with IDBI Capital.

"This would make decision-making and reforms easier, as it may not need to rely on alliance partners to form the government," he told AFP.

In November, investment bank Goldman Sachs hiked its rating for India's markets to "market weight" from "underweight" on optimism that the BJP's prime ministerial candidate Narendra Modi -- currently chief minister of western Gujarat state -- would bring in business-friendly reforms.

"Equity investors tend to view the BJP as business-friendly, and ... Modi as an agent of change," Goldman analysts said in the report.

Final results of four state elections on Sunday showed the BJP won by a landslide in the states of Rajasthan and Madhya Pradesh, and secured a narrow victory in restive Chhattisgarh.

The party also won the most seats in New Delhi, followed closely by an anti-corruption party.

Analysts say the results are a sign of discontent among voters with India's ruling Congress party after a slowdown in economic growth and a string of corruption scandals.

The elections were also seen as a test for Modi, who has support among middle-class voters but whose reputation was tarnished by deadly anti-Muslim riots in 2002 that occurred on his watch as Gujarat chief minister.

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