LONDON May 16 (Reuters) - Indian shares soared to new peaks on Friday after early returns suggested a resounding election victory for the pro-business BJP party, while a weak performance on Wall Street kept other emerging markets subdued.
Analysts say measures taken by the outgoing Congress party and the Reserve Bank of India have stabilised Indian markets in recent months, but gains have accelerated since the BJP named Narendra Modi as its candidate for prime minister in mid-September.
"The Modi victory can act as a catalyst to unlocking the growth that India's $2 trillion economy promises," said Slim Feriani, chief investment officer of Advance Emerging Capital, which is overweight in Indian stocks.
Indian shares rallied as much as 6 percent to fresh record highs before trimming gains to trade 1 percent higher on the day. The index remains on course for a 5 percent rise this week.
The rupee, one of the so-called Fragile Five currencies last year, hit an 11-month high, while State Bank of India's five-year credit default swaps hit 11-month lows, according to Markit. The bank's CDS are used as a proxy for sovereign credit.
The broad emerging equities index steadied below 6-1/2 month highs set in the previous session, but was on course to rise 3 percent this week, its third week of gains.
Emerging markets are finding support across the board from the prospect of further monetary stimulus in the euro zone, United States and possibly China.
Investors put $400 million into emerging equity funds last week after outflows in the week before, while emerging bond funds drew in $1.2 billion, their seventh straight week of inflows, banks said on Friday, citing data from EPFR Global.
But weakness in Wall Street on Thursday, coupled with stronger U.S. data which raised question marks over continued U.S. stimulus, took the froth from recent gains.
Russian stocks fell half a percent, retreating from the previous session's 2-1/2 month highs.
Russian assets had been strengthening in recent days on growing expectations of a resolution to the conflict in Ukraine.
Ukraine's interim leaders hope elections on May 25 will bring political stability after five months of upheaval including Russia's annexation of Crimea and pro-Russian separatist rebellions in the east.
Turkish stocks fell half a percent to 9-day lows and the lira hit two-week lows, with speculation of a rate cut following next week's central bank meeting.
South African stocks and the rand fell.
Lonmin, one of the three strike-hit mining companies in South Africa, said on Thursday it would consider going to court to try and stop the strike as some workers have faced violence and intimidation.
In central Europe, the leu hit one-week highs after Standard & Poor's raised Romania's credit rating to investment grade, at BBB-minus.
For GRAPHIC on emerging market FX performance 2014, see link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2014, see link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2014, see link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2014, see link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see ) (Reporting by Carolyn Cohn; Editing by Toby Chopra)