By Vishal Sridhar
(Reuters) - Indian shares recovered after falling more than 2 percent in early trading on Monday as Prime Minister Narendra Modi's party appeared to win his home state of Gujarat for a sixth term as counting of votes progressed.
The broader NSE Nifty was up 0.8 percent at 10,415.75 as of 0542 GMT, while the benchmark BSE Sensex was 0.79 percent higher at 33,726.82.
Earlier in the session, the indexes dropped as much as 2.5 percent each, posting their biggest intraday loss in more than a year as initial counting showed a close fight between the ruling Bharatiya Janata Party and the main opposition Congress party.
Bonds and the rupee also recovered after earlier losses.
India's benchmark 10-year bond yield was trading 2 basis points higher at 7.16 percent at 0601 GMT, after earlier rising to as high as 7.22 percent.
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The partially convertible rupee was trading at 64.14/15 per dollar versus its previous close of 64.04. The rupee dropped to a low of 64.74 in early trade.
"The markets will remain range bound as there are no further triggers," said Kunj Bansal, executive director & CIO - equity, Centrum Wealth Management Ltd.
Elections in Gujarat was seen as a crucial test for Modi's party ahead of the general elections in 2019. A win would help him dismiss critics who said his party's support was eroding after the withdrawal of high-value currency notes last year and poor implementation of the Goods and Services Tax this year.
Modi's party is also set to form government in Himachal Pradesh, a small Himalayan state, as leads indicated.
Financials and banking stocks led the recovery in the markets. Nifty PSU Bank index and Nifty Finance index were up more than 3 percent and 1 percent, respectively.
Gujarat-based companies such as Gujarat Alkalies and Chemicals Ltd, Gujarat State Fertilizers and Chemicals Ltd erased early losses to climb more than 1.5 percent each. Adani Enterprises Ltd, which dropped as much as 10 percent earlier, was trading up 1.5 percent.
Meanwhile, shares of Future Supply Chain Solution Ltd rose as much 4.8 percent on their market debut after the logistics provider's 6.5-billion-rupees ($101 million) initial public offering.
(Reporting by Vishal Sridhar in Bengaluru; Editing by Gopakumar Warrier)
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