Indian stocks up after key vote

Indian shares have been volatile in recent weeks

Indian stocks have risen by more than 5% after the government won a vote of confidence that could pave the way for key economic reforms.

The Bombay Stock Exchange's benchmark Sensex index climbed 5.2% to 14,840.8 points, before slipping to 14,616.91.

The broader National Stock Exchange, rose 4.5% to 4,432.

Officials said the vote would clear the way for the liberalisation of rules on foreign investment in private banks and insurance firms.

As well as ensuring the survival of the ruling coalition, the vote of confidence also paves the way for a controversial civilian nuclear reactor deal with the US.

Indian shares have been fluctuating in recent weeks, prompted by investor fears over inflation and the uncertainty over the survival of the federal government.

'Biggest challenge'

"The market never likes uncertainty, so in that sense the end of the political uncertainty has brought in a feel good factor," said Arun Kejriwal, strategist at research firm KRIS.

"The government now has an opportunity to push through some reforms but whether they will actually be able to do it, I am not too sure."

According to the BBC's Sanjoy Majumder in Delhi the nuclear deal is expected to unlock billions of dollars in investment over the next two decades.

However, he said that attempts by Manmohan Singh's government to push through crucial economic bills, which will permit greater foreign investment in banking and insurance, would be tougher.

He added that the government's biggest challenge would be to manage voter discontent over growing inflation, now at nearly 12%, prompted in part by rising oil prices.