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Indian shares close at record high

Indian shares raced higher on Monday, with the Sensex closing at a record high.

MUMBAI: Indian shares raced higher on Monday, with the Sensex closing at a record high.

Analysts said the rally is built on hopes the main opposition Bharatiya Janata Party will win a majority in the general elections.

The great Indian stock market rally is reaching fever pitch.

Investors seem to take it for granted that the opposition party led by Narendra Modi will bag 272 seats or more. That would mean it will automatically be called on to form the next government.

Sunil Shah, Khambatta Securities’ director, said: "This is the highest jump Sensex has shown in this current year. I feel the reason… we see (it) is not global cues -- nothing to do with the economy, no big bang announcement. It’s simply one factor and that's the Modi factor."

Foreign Institutional Investors pumped in more than US$200 million on Monday alone.

Trading was so aggressive that it surprised many analysts, some of whom had been bracing for short-sellers. Many now hope the rally will continue past election season.

Akash Jindal, a market analyst, said: "My expectation, considering overall factors, is that the rise has just started. It's the start of a mini bull phase. I mean, Sensex would be around 23000, this was my prediction. And now my prediction… -- I am saying that Sensex may again cross the 26000 level by Diwali (festival). "

But on the flip side, brokers fear that anything short of a decisive victory, meaning fewer than 220 seats, could spark the worst sell-off in years.

Analysts warned that shares could plunge by up to 8 to 10 per cent in one day, with public-sector and infrastructure stocks bearing the brunt of the sell-off.

Some brokerages are already reportedly raising their margin requirements in a bid to cushion themselves against volatility, when official results are unveiled on May 16. 

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