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India Regional Bloc Splinters in Modi Boost as Stocks Hit Record

Eleven Indian regional political parties that formed an alliance nine days ago to contest elections next month showed signs of falling apart, boosting stocks on speculation the main opposition party will benefit.

A disagreement over seat sharing prompted three regional parties to scrap plans to campaign together in the southern state of Tamil Nadu, the Communist Party of India (Marxist) and the Communist Party of India said in a statement yesterday. The parties said the bloc, which controls 17 percent of 545 parliamentary seats, remains intact for the national election.

“These developments are confined to Tamil Nadu and it will not affect the arrangements at the national level,” Nilotpal Basu, a leader of Communist Party of India, said in an interview.

Divisions among smaller parties may make it easier for Narendra Modi, the prime minister candidate of the main opposition Bharatiya Janata Party, to woo coalition partners. Opinion polls show the BJP winning the most seats while falling short of a majority, with Prime Minister Manmohan Singh’s Congress party a distant second.

“There is a lot of excitement in the markets -- we expect at least a 10 percent rally from here till the elections,” Shishir Bajpai, director of wealth advisory at IIFL Wealth Management Ltd., which has $1.7 billion under management and advisory, said by phone from Mumbai. Smaller parties that try to group together at the national level will eventually fall apart and go “whichever way the wind is blowing,” he said.

Stocks Climb

The S&P BSE Sensex (SENSEX) advanced 1.8 percent to 21,906.26 at 2:54 p.m. in Mumbai, set for a record close on the biggest jump in more than three months. The rupee strengthened 0.1 percent to 61.04, set for its lowest close since Dec. 10.

Regional parties could secure as many as 215 seats of 543 up for grabs, with Modi’s BJP emerging as the largest party with 202, a Times Now and C-Voter opinion poll predicted on Feb. 13.

Regional-party coalitions have failed to serve full terms in the past. The last one to run India, which was in power from 1996 to 1998, collapsed after the Congress party withdrew outside support.

Tamil Nadu is the sixth-largest state in terms of parliamentary seats, contributing 39 of 545 lawmakers in the lower house. The communist parties fell out with the All India Anna Dravida Munnetra Kazhagam party led by Jayalalithaa, a former actress who is the chief minister of the state.

‘Not Viable’

While Jayalalithaa is currently backing the bloc of regional parties that formed last week, she has supported both Congress-and BJP-led governments in the past.

“Today’s development is another sign that the third front is not viable,” S. Chandrasekharan, director of the South Asia Analysis Group, based in a suburb of New Delhi. “With each election there is always a threat and then it disappears when they don’t have the numbers.”

Members of the new bloc are the Samajwadi Party, Janata Dal (United), AIADMK, Communist Party of India (Marxist), Communist Party of India, Biju Janata Dal, All India Forward Bloc, Jharkhand Vikas Morcha, Revolutionary Socialist Party, Asom Gana Parishad, and Janata Dal (Secular).

To contact the reporters on this story: Andrew MacAskill in New Delhi at amacaskill@bloomberg.net; Ganesh Nagarajan in Chennai at gnagarajan1@bloomberg.net

To contact the editor responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net

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