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Election Fears Sink India Markets

India's opposition leader Sonia Gandhi waves to party supporters during an election campaign rally in Pathankot, India, Sunday, May 2, 2004.
AP
India's stock market took the biggest plunge in its 129-year history Monday as investors panicked over how communist parties would influence the policy of the incoming coalition government of Sonia Gandhi.

Stock market regulators halted trading twice during the day and the government reportedly instructed state-run financial institutions to buy heavily into the market so to stop the tumbling share prices.

Still, the benchmark index of the oldest Bombay Stock Exchange, the Sensex, closed Monday at 4505.16 points, down 11.1 percent from Friday, the last trading day. The Nifty index of the National Stock Exchange, the country's largest that was set up in 1994, plunged 12.3 percent.

Earlier Monday, the Securities and Exchange Board of India ordered suspension of trading twice as stock prices tumbled more than 15 percent on the two main bourses of the country.

Share prices began recovering Monday when markets resumed trading for the third time. The Sensex and Nifty recovered, reversing nearly a third of the losses suffered in early trading.

According to the Hindustan Times, investors were worried that Gandhi's Congress Party will slow down the privatization of state industries and adopt policies unfriendly to business.

The Press Trust of India quoted a Senior Congress Party leader and Finance Minister Manmohan Singh saying the incoming government was not necessarily opposed to privatization.

"Our tax policies and (foreign direct investment) will be pro-growth and to create an environment favorable for Indian enterprises," Singh told the Press Trust.

Congress is coming to power after it was handed a stunning victory last week that reflected anger among millions of India's rural poor over being left out of the economic boom fostered by the current government.

The party of Prime Minister Atal Bihari Vajpayee conceded the vote, leaving Gandhi, the Italian-born widow of the former Prime Minister Rajiv Gandhi, to take the helm of the world's largest democracy.

Vajpayee resigned Thursday night but was to stay on until the new government is formed, the president's secretary said.

It was one of the most dramatic political upsets since Indian independence almost 60 years ago.

"We have not got the mandate of the people," said Venkaiah Naidu, president of Vajpayee's Bharatiya Janata Party. He said the decision to concede the race was made at a 90-minute meeting of the party and its coalition partners.

Official results showed Congress and its allies were leading Vajpayee's 11-member National Democratic Alliance 178 seats to 146 seats.

Sonia Gandhi won a seat in the northern town of Rae Bareli. Her son, 34-year-old Rahul, won a seat in Amethi, her previous constituency.

Gandhi now faces the same challenges as she did in 1999, when she failed to take over the government due to disagreement over whether she should become prime minister. Among her potential allies on the left are senior politicians with much more experience; without their support she won't have a majority in Parliament.

George Fernandes, defense minister under Vajpayee, said the new Parliament could meet as early as Monday.

It was an embarrassing defeat for Vajpayee's Hindu nationalist-led government, which had called elections six months early because it felt confident of winning an even bigger majority in Parliament, based on the roaring economy and prospects of peace with Pakistan.

Before the five-phased elections, which began April 20, Vajpayee and his alliance had been expected to win enough seats to eventually form a government and rule the country for another five years.

But Congress focused its campaign on the country's 300 million people who still live on less than a dollar a day. It hammered away at the lack of even basic infrastructure, electricity and potable water for millions of rural poor.

Gandhi has pushed for a secular India in contrast to the BJP's Hindu nationalist message. Her two children, Rahul and Priyanka, are up-and-coming politicians and state-run television reported that Rahul won his race to enter parliament for the first time.

The Gandhi dynasty dominated Indian politics since independence from British colonial rule in 1947. Jawaharlal Nehru, India's first prime minister, headed the country from independence until his 1964 death. He was followed by his daughter, Indira Gandhi, who was killed by her own bodyguards in 1984.

Rajiv, her son and Sonia's husband, took power and ruled until 1989. Two years later, he too was assassinated.

The family is not related to Mohandas Gandhi, India's independence leader.