* India's NSE gains as much as 2.1 pct to new peak
* Bonds, rupee strengthen; RBI intervenes to cap INR gains
* Modi win in Uttar Pradesh seen endorsing reform agenda
* But share gains may be limited by valuation worries
(Updates with details, latest price levels)
MUMBAI/BENGALURU, March 14 India's NSE index
rose as much as 2.1 percent to a record high on Tuesday as
investors saw Prime Minister Narendra Modi's landslide victory
in the northern state of Uttar Pradesh as endorsing his economic
Modi's win, announced on Saturday, strengthened his claim to
a second term in national elections in 2019, and investors are
betting it will embolden the ruling Bharatiya Janata Party (BJP)
to embark on more reforms including launching a national sales
The broader NSE index rose as much as 2.1 percent to
a record high of 9,122.75 points in the first trading session
since the election results were announced, surpassing its
previous peak of 9,119.20 on March 4, 2015.
But the index then pared some gains and was up 1.5 percent
at 0410 GMT, while the benchmark BSE index was up 1.6
Indian markets were closed on Monday for a holiday.
The benchmark 10-year bond yield fell 3 basis
points to 6.87 percent from its previous close, while the Indian
rupee strengthened to 66.2400/66.2425 from its
66.60/66.61 close on Friday.
The gains in the rupee prompted the Reserve Bank of India to
intervene once it strengthened to around 66.16 per dollar,
Modi's victory "is a huge confidence boost for reform and is
another step on the way to a story that could place him as one
of the most successful reformers in history," said Simon
Quijano-Evans, investment strategist at Legal & General
Investment Management in London.
The prime minister's win should bode well for foreign
portfolio investment in India.
Foreign investors have already started returning to the
country, having bought a net $1.5 billion in equities and $887.3
million in debt in February, following four consecutive months
of net sales. They have remained net buyers in March.
But expensive valuations and caution due to an anticipated
rate hike by the U.S. Federal Reserve this week could temper
Indian shares are trading at a price-to-earnings ratio of
19.85 over the next 12 months, compared with their five-year
historic average of 17.8, according to Thomson Reuters data.
(Reporting by Suvashree Dey Choudhury in MUMBAI and Arnab Paul
in BENGALURU; Additional reporting by Savio Shetty and Swati
Bhat in MUMBAI, and Sujata Rao-Coverley in LONDON; Writing by
Rafael Nam; Editing by Richard Borsuk)