INDIA LIVE-A call for reform as Modi's coalition looks headed for runaway win

Market trading boards are seen at the Australian Securities Exchange in Sydney, Friday, February 9, 2018. ( AAP Image/Ben Rushton) NO ARCHIVING

May 23 (Reuters) – 0520 GMT: MODI URGED TO INITIATE REFORMS AS EARLY COUNTS SHOW HIS COALITION IN STRONG LEAD

Prime Minister Narendra Modi was urged to bring strong reforms in his second term as trends in the counting of votes in the general election showed his Bharatiya Janata Party (BJP)-led alliance winning a comfortable majority.

“We need a solid reform process, which is a long-term process, and monetary policy support to shore up liquidity in the system,” said Ritesh Jain, global investor and former CIO at BNP Paribas Asset Management. Prime Minister Narendra Modi at an election campaign rally in New Delhi earlier in the month. REUTERS/Adnan Abidi

“The consumption boom is tapering down, you need an investment boom, and the result of this election (should) at least open up foreign capital to invest in out economy,” Jain said in the Reuters Global Markets Forum chatroom.

“Make in India will not work – India is just too costly a place to produce anything. Ask Vietnam, Ecuador or Bangladesh.”

(Click reut.rs/2VXBoxz to view a graphic showing live updates of India’s elections results).

0515 GMT: STOCKS HIT RECORD LEVELS, RUPEE AND BONDS ALSO GAIN

The broad Nifty index was up 2.24% at 12,000, breaking a key resistance level at 11,893.48 points, as of 0515 GMT, while the benchmark BSE index was 2.29% higher at 40,012.35 points.

The rupee was headed toward support at 69.20 to the dollar, up from the 69.67 close on Wednesday, while the yield on the 10-year bond droped 3 bps to 7.23%.

DBS said the yield on the benchmark 10-year bond was likely to ease to the weaker end of the 7.25%-7.35% range, if results mirrored the exit poll. “On the contrary, weak support for the ruling regime will be construed as a negative risk event, sending yields towards 7.4%,” it said.

Television channels said trends showed the BJP alliance leading in about 320 seats with the main opposition alliance leading in about 110 constituencies. To win, a party needs to win 272 seats in the 543-member lower house of parliament. 0700 GMT: NEW GOVERNMENT HAS TO ADDRESS BANKS, JOBS, INFRASTRUCTURE

Modi is seen most likely to win the election, promising policy continuity, but economists say the task before the new government is immense as growth slows and financial markets clamour for decisive and meaningful reform.

Jobs will define Narendra Modi’s next five years

“We are facing a liquidity and credit crisis – two separate issues which need to be handled differently,” said Rajeev Pawar, group head for balance sheet management and investments at Edelweiss Financial Services in Mumbai.

“Just cutting rates or a new government will not bring rates down,” he said in the Reuters Trading India chatroom.

Arguing for a sovereign bond issue by the government, he said: “Jobs need to be created. Jobs lead to income and consumption. But it’s easier said than done. To revive the economy you need money and the government is already deeply in debt.” Election staff members count votes in Ahmedabad, India. REUTERS/Amit Dave

The Mint newspaper said much needed to be done to convert the enthusiasm in financial markets to the real economy, including addressing faltering consumption.

“The crisis with India’s non-banking financial companies is still unfolding and could put the financial system through more pain,” it added. “Jobs remain worryingly scarce.”

The new government’s priority is likely to be on reforms on land, labour, privatisation and export promotion, Goldman Sachs said.

However, the Control Risks consultancy said: “Do not expect him (Modi) to carry out a wholesale privatisation of state-owned banks or loosen political control over lending decisions (which led to the debt crisis to begin with).

“At the same time, increased pressure over rural distress and unemployment will stoke Modi’s economic populist instincts, which will likely see an increased focus on rural spending and handouts aimed at supporting small and medium-sized enterprises.”

As election dust settles, jobs, trade, security high on government’s to-do list

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