NEW DELHI – Two powerful parties refused Monday to join Sonia Gandhi in a coalition government, setting off the biggest plunge in the 129-year history of India's stock market and twice forcing regulators to halt trading.
Investors feared that Gandhi would have to backtrack on her pledge to go forward on the liberalization of the economy.
More than $45 billion in market capital has been wiped out since share prices began tumbling last Thursday, when it became clear Gandhi had ousted the Hindu-nationalist coalition led by Atal Bihari Vajpayee (search) in national elections.
As she prepared to seek formal approval from the president for the formation of what will now have to be a minority government, Hindu nationalists added to the turmoil with street protests against Gandhi's bid to become the nation's first foreign-born leader.
The communists said they would back Gandhi's ascension as prime minister in coming days, but not from within the coalition ranks.
"The entire left will support the government from the outside," D. Raja, spokesman of the Communist Party of India (search) told The Associated Press.
The Communist Party of India-Marxist (search) also declined to join, saying her new alliance could force them to concede too much to India's right wing.
Trading had to be halted for the first time in the history of the Bombay Stock Exchange, after it plunged a record 15 percent within 90 minutes.
"Down with Sonia Gandhi," shouted hundreds of small investors gathered around the exchange, which was established in 1875.
Initial market plunges of more than 10 percent prompted regulators to briefly suspend trading, and further plunges after markets reopened led to a second suspension until later in the day.
Share prices began recovering Monday when markets resumed trading for the third time.
The leftist parties, which have more than 60 seats in the 545-member lower house, were essential for the government to secure a majority in Parliament.
Gandhi's Congress party (search) and its allies won 216 seats in the elections, short of the 272 needed for a majority in the 545-member lower house of parliament. For that, she needs the 62 seats held by leftist parties.
The communists differ sharply with Congress over such key economic and foreign policy issues as privatization of state-run companies and support for greater ties with the United States.
Even with the support of the socialist Samajwadi Party (search), which announced Monday it would join the alliance and bring in its 36 seats, the Congress would still be short with only 257 seats.
Political analyst Pran Chopra said the communists' decision will make Gandhi's government unstable.
"Their decision not to join, leaves the left parties free to raise objections against policies that they don't agree with," said political analyst Pran Chopra. "At the same time, the left parties can escape blame for whatever may go wrong."
At the same time, the communists — who are opposed to a hard-line Hindu nationalist presence in Parliament — do not want to see the collapse of a secular government led by Congress and will likely tread carefully, others said.
Gandhi put off Monday's planned meeting with President A.P.J. Abdul Kalam (search) to present him with letters from 11 coalition partners endorsing her leadership of a Congress-led alliance. Congress party officials told The Associated Press she needed more time to form her proposal.
The stock market dive over the prospect of Gandhi becoming prime minister contrasted sharply with the euphoria that had gripped the markets five years ago on the day Atal Bihari Vajpayee was named prime minister. The Bombay Stock Exchange closed at a record high of 5031.78 points on that day in 1999, the first time the index had closed above 5,000.
Vajpayee resigned May 13 when it became evident his 11-member National Democratic Alliance had been decisively voted out of office. On Monday the alliance pledged to boycott Gandhi's swearing-in ceremony if she is named prime minister, saying India should not have a foreign-born leader.
About 300 Hindu nationalists demonstrated in New Delhi on Monday, echoing their disapproval.
As the stock exchanges went into a free fall, senior Congress party leaders were scrambling to restore market order.
"I want to assure the investors that our policies will be pro-growth, pro-investment and pro-savings," Manmohan Singh, a former Congress finance minister and architect of India's market liberalization.
"We will continue with the good work done by the previous government but wherever midcourse correction is required, we will do it," Singh said.
Gandhi, born Sonia Maino in Italy, moved to India in 1968 to become the 21-year-old bride of Rajiv Gandhi, who later became prime minister and was killed in a suicide bombing in 1991. Gandhi became an Indian citizen in 1983.
She would be the fourth member of the Nehru-Gandhi dynasty to lead India, after her mother-in-law, Indira Gandhi, and her husband. Indira's father, Jawaharlal Nehru, was India's first prime minister after independence from Britain in 1947.