Exit polls suggest India heading for weak coalition

By Surojit Gupta

NEW DELHI (Reuters) - India could be heading for a weak coalition government on Thursday, with exit polls from the general election suggesting the ruling Congress-led coalition and its rivals would fall short of an outright majority.

Three exit polls on Wednesday showed the ruling Congress-led coalition was slightly ahead of the opposition Hindu-nationalist alliance, but both groups were in need of smaller allies to gain a parliamentary majority.

Official results will be released on Saturday.

Such a scenario may leave little room for either group to maneuver on the economy, because a shaky coalition is seen as unlikely to push key reforms such as raising foreign investment limit in the insurance sector and privatization.

"If the Congress' lead was larger, the market may have taken it as a good sign," said Gajendra Nagpal, chief executive of Unicon Financial Intermediaries.

"But now that it is just a slender lead, the market may become uncomfortable and think there might be more of a mess in the offing."

After the last election in 2004, Indian markets tumbled on fears that an unstable coalition would soft-pedal on the next stage of reforms in Asia's third-largest economy which striving to emerge as a major global player.

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