India shines in otherwise downbeat session

LONDON - Indian shares vaulted over 17 percent on Monday after elections returned the country's ruling coalition with a stronger mandate, boosting an otherwise lacklustre session that saw investors fretting about the strength of the global recovery.

Emerging sovereign spreads 11EMJ widened above 500 basis points as increased supply pressured prices while Russian equities sank on a sell-off triggered by easing oil prices.

The emerging equities benchmark .MSCIEF was up 1.3 percent by 1040 GMT, driven by the massive 17.3 percent surge in Indian shares .BSESN following elections results which cemented the hold of the ruling Congress party.

A victory for the Congress has raised investor hopes for a strong government able to push through reforms in the banking and insurance sectors as well as move ahead on privatisations.

India's biggest single-day share gain in almost two decades triggered circuit breakers that halted trade twice in a session that ended earlier and pushed the rupee up more than 3 percent to five-month highs versus the dollar.

Elsewhere, the mood was sober with emerging European equities .MIEE00000PUS down over 1 percent.

Hopes of a global economic recovery drove markets higher for nine weeks in a row but last week's first-quarter economic data from eastern and central Europe have tempered expectations.

"We don't have a lot of data (this week so) there also may be a lot of indigestion about," said Nigel Rendell, emerging markets strategist at Royal Bank of Canada.

"The markets are now obviously a little bit more expensive than March."

What little data that was seen early in the day proved fairly downbeat.

Russian industrial output fell by a record 16.9 percent in April, larger than consensus forecasts, helping to fuel a sell-off triggered off by weakening oil prices.

Shares on the country's dollar-denominated RTS Index and the rouble-denominated index , which scaled seven-month highs last week, were down some 2 percent.

The rouble held firm against its euro-dollar basket after recent gains that saw the unit rise to fresh four-month highs against the greenback despite recent interest rate cuts.

"We retain our generally negative rouble outlook as we believe current optimism is overdone and that politically further strength is not welcome. Note that import substitution has become a key part of the government's approach to the crisis and a stronger currency (which makes imports cheaper) is detrimental to this policy," Beat Siegenthaler, TD Securities chief emerging markets strategist, said in a client note.

Meanwhile, emerging sovereign debt prices remain under pressure from the recent slew of new issues, sinking after recovering to early October levels.

Last week, Slovakia secured 2 billion euros with a bond issue that was twice the size originally envisaged.

JPMorgan's Emerging Markets Bond Index 11EMJ was 3 basis points higher to trade at 503 bps above U.S. Treasuries.