Mumbai, Dec 9 (Reuters): The BSE Sensex rose to a record high on Monday and the rupee hit a four-month high after the main opposition party Bharatiya Janata Party, widely seen by investors as being more business friendly, swept three out of four key state elections held since last month.
The Sensex rose more than 2 percent to surpass its previous all-time peak hit on November 3, capping a remarkable turnaround from a few months ago when the country was gripped by its worst market crisis since 1991.
The results were seen bolstering the chances of BJP and its prime minister candidate Narendra Modi in general elections due by May next year, and were widely seen as a blow to the ruling Congress Party.
Despite recent policy action by Congress, including moves to attract foreign investments, markets have been clamouring for more measures to bolster an economy growing at its slowest in a decade and to ease infrastructure bottle necks that keep inflation high.
Investors, for now, have concluded that BJP is the most likely to deliver change, analysts said.
"The BJP is considered more right-of-center, pro-business and reform-oriented," Nomura said in a note to clients.
"The fact that runaway spending by the ruling party has not won any votes could be taken as a very positive signal by the markets in terms of voter preference for the kind of policy favoured by the electorate."
The Sensex gained as much as 2.3 percent to a record high of 21,483.74 points, while the broader Nifty rose as much as 2.5 percent to an all-time high of 6,415.25, surpassing its previous peak hit in January 2008.
Sectors such as infrastructure and construction, seen as most benefitting from a potential BJP victory in elections next year, did especially well.