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India’s stocks flying high as PM Modi is set to secure second term

India’s stocks flying high as PM Modi is set to secure second term
Benchmark Indian indices have closed with gains and came close to their all-time highs after exit polls showed that the country’s ruling alliance led by Prime Minister Narendra Modi's party is likely to win the general election.

Both S&P BSE Sensex and the NSE Nifty 50 were up more than three percent as of Monday's close. BSE Sensex was higher 1,421 points, or 3.75 percent, to end trading at 39,352.67 points. This is just around 135 points lower than its all-time record.

The Nifty 50 indices extended gains to close at 11,828.25, having jumped 3.69 percent. The result is the key Indian index’s closing high, and just 28 points short of its intraday record of 11,856.

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Monday’s results are considered the biggest single-day gains for both indices in more than five years, since September 2013, according to the Economic Times.

Markets cheered after most exit polls results signaled that Narendra Modi is set to stay in power for another five years as the National Democratic Alliance (NDA) is projected to secure the majority of seats in India’s lower house of parliament. The final results of the vote will not be officially announced until Thursday.

Modi’s is seen as a pro-business leader, and since he took office in May 2014, the two benchmark equity indices have surged by more than 40 percent. Modi's government has also managed to implement major reforms, including in healthcare and the tax system and allowing much-needed foreign investment into domestic construction projects. However, it will have a long list of problems to solve during the next term. This includes compliance with a targeted budget deficit, high unemployment rate, as well as the trade deficit.

Some analysts say that the country needs further reforms to keep the market rally alive.

“What would help the markets sustain the momentum is factors that are fundamentally important, like decisive policy initiatives from the new government, faster land and labor reforms, and also the unfinished task of quick consolidation and re-organization of the banking system,” Joseph Thomas, head of research at Emkay Wealth Management, told Reuters.

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