India's prime minster-elect Ms Sonia Gandhifaced her first crisis today before even taking power when pivotal leftists refused to formally join her government and markets crashed on fears over economic policy.
Shares on the Bombay exchange plunged almost 16 per cent - the worst fall in its 129 years - before trading was suspended a second time. They later recovered to about 9 per cent down, on top of heavy losses last week. The rupee also fell 0.8 per cent today despite central bank support.
The crash, including a big drop on Friday, has wiped billions of dollars off the value of India's listed companies. Hundreds of brokers and small investors protested outside the bourse on the day Ms Gandhiwas due to visit the president to claim power.
Leftist parties, which hold more than 60 of the new parliament's 545 seats, decided not to formally join Ms Gandhi's Congress party and its allies in the coalition expected to be sworn in on Wednesday.
They have pledged to support her from outside on vital votes, such as confidence motions, but the decision has stoked concerns about the government's stability and fears the communists will wield their power without responsibility.
Investors fear the leftists, led by the Communist Party of India (Marxist), the third largest party in the parliament with 43 seats, will block or slow key reforms in Asia's third largest economy, especially privatisation of bloated state firms.
The Italian-born Ms Gandhi, heir to the Nehru- Gandhidynasty, is expected to visit President Abdul Kalam to claim power today, armed with letters of support totalling more than 320 seats. That figure includes the leftist bloc.
If Mr Kalam agrees, her new government is due to be sworn in on Wednesday, making her India's first foreign-born prime minister and the dynasty's fourth after her husband, Rajiv, mother-in-law Indira and Indira's father Jawaharlal Nehru.