According to election results as of Friday, an alliance between Congress and the communists will be able to form the next Indian government even without securing new partners.
The Congress on its own won 145 of the 539 seats declared, but with the support of pre-poll allies and the leftists, the Congress-led coalition would have 278 seats, six more than needed for a majority.
The inclusion of leftists in the mix sent Indian shares sliding Friday as investors worried key economic reforms such as privatisation would be delayed.
The BSE 30-share benchmark Sensex index was off 2.51 percent or 135.32 points at 5,264.15 in morning trade amid heavy selling of state-owned companies.
"The feeling is the leftists who are going to be influential in forming the new government are against virtually every kind of reform whether it be privatisation in oil, telecom, banking or any other sector," said Prakash Lala, manging director at Centaur Securities.
A beaming Sonia Gandhi, the torch-bearer of India's historic political dynasty, told reporters after the upset result was announced on Thursday she would seek to form a "strong, stable and secular" government.
"Over the next few days the process of government formation will gather momentum," she said.
Major Dalbir Singh, a local Congress leader, told AFP Friday the process had already begun.
"Forming the government with the present numbers is not the problem," Singh said. "But our aim is to get as many secular parties on board as possible to consolidate the secular front." Singh said Gandhi had sent envoys to talk to various groups, including the Samajawadi Party and the Bahujan Samaj Party, two influential regional groups in Uttar Pradesh state.
"The envoys will hold talks with them and then get back to Sonia Gandhi with the details. These developments could be discussed in an informal meeting of the Congress Working Committee later in the day." The communists were also huddled in meetings in New Delhi Friday, their spokesman said.
Gandhi, 57, the Italian-born widow of slain former premier Rajiv Gandhi, is keeping mum over whether she would seek the job of prime minister amid bitter controversy about her foreign origin.
The decision-making Congress Parliamentary Party is due to meet in New Delhi on Saturday to elect a leader, who is expected then to become prime minister.
Many in Congress say the job is Gandhi's. But Hindu nationalists -- and some Congress allies -- say she is unacceptable as they view her as a foreigner even if she wears saris and speaks fluent, if accented, Hindi.
"All the workers want it, party officials want it. Now she will have to decide whether she wants to be the prime minister," senior Congress leader Ahmed Patel said.
Among the first to react to the win, Pakistan said it looked forward to working with a new government to continue talks on Kashmir -- the main cause of friction between the nuclear rivals and the spark for two wars.
Washington sent its congratulations to Congress.
The unexpected defeat of Prime Minister Atal Behari Vajpayee's Hindu nationalist Bharatiya Janata Party (BJP) was seen by observers as an angry backlash by poor voters who felt ignored by a government whose focus was seen to be on the wealthier urban classes - Sapa-AFP
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