Monday, May 17, 2004

Turmoil on Indian Stock Market ...

Doubts on Future of Privatization Effort

CNN reports that India's stock market has dropped as much as 16% over news of a coalition government forming with Leftist groups that oppose further privatization.

Monday, May 17, 2004 Posted: 6:39 AM EDT (1039 GMT)

Investors are spooked about what lies ahead for India's economy.

NEW DELHI, India -- India's Bombay Stock Exchange has recorded its biggest loss amid concerns over the future of economic reforms under a new coalition government.

Trading was suspended twice Monday, with the key Sensex stock index plummeting almost 16 percent in morning trade to a low of 4227.50 -- the biggest crash in its 129-year history.

In afternoon trading during a third session, the market was 11.14 percent lower at 4505.16.

The plunge within the first few minutes of trade continued the market's bleak reaction following the shock victory for Sonia Gandhi's Congress party in the national election on Thursday.

CNN's Ram Ramgopal in New Delhi said the one operative word in India at the moment was "fear," as investors realize that the communist and other leftist parties on whom Gandhi will have to rely to form a government, are against privatization.

While Gandhi has won broad support to become India's next leader, stock and currency markets have been unnerved by the prospect of her governing with the support of left-wing parties. (Investors flee Gandhi's India)

This is despite her Congress party vowing to continue the reforms it started more than a decade ago when it broke India out of socialist-style economics and which were continued by the ousted Bharatiya Janata Party-led coalition.

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