Indian Prime Minister Manmohan Singh's re-election 18 months ago sent stocks and the rupee to record gains as investors anticipated measures to promote investment. Now, the regional parties keeping Singh in power are blocking his agenda.

One of Singh's 10 parliamentary partners is at the center of a federal telecommunications probe that may turn out to be India's biggest case of political corruption. Another regional ally is slowing Singh's efforts to change rules on how steelmakers Posco and ArcelorMittal acquire land for their mills, delaying as much as $100 billion in investment.

Even after winning the most parliamentary seats of any party in two decades, Singh's Indian National Congress has failed to implement economic changes sought by business leaders. His coalition lacks a parliamentary majority and is distracted by political scandals, rising inflation and a worsening Maoist insurgency in eastern India

"There are a lot of very important reforms that need to be passed that won't go through," said Apurva Shah, head of research at Prabhudas Lilladher Pvt. in Mumbai, which provides equity and brokerage services. "It's frustrating. The government is struggling to assert its authority."

Such Singh initiatives as opening up the $1.3-trillion economy to foreign insurers and retailers, including American International Group Inc. and Wal-Mart Stores Inc., are in jeopardy, Shah said.

David Fuller's view My impression is that Manmohan Singh is a very good prime minister but the challenges of taking India's sprawling democracy forward remain daunting.

This has frustrated some investors over the last decade or more, and often to their opportunity cost if Indian equities or funds were not part of their portfolio. Certainly a command economy would be more efficient but I also suspect that it would inhibit development of India's formidable intellectual capital, which is its greatest asset in my opinion.

I expect India's stock market performance to remain high-beta and the Sensex Index (p&f, monthly, weekly & daily) has fallen nearly 10% since testing its 2008 high earlier this month. On past evidence and if this remains a 'healthy correction', as I suspect, support is likely to be encountered in the region of the rising 200-day moving average. This also coincides with potential support from the upper side of the previous trading band evident near 18,000.

For subscribers who are interested in India's stock market, my preferred strategy has always been to buy on corrections. Similarly, for active rather than buy-and-hold managers, I also advise lightening positions when uptrends are clearly overextended relative to their medium-term trend mean represented by the 200-day moving average.