Hopes were that the Samajwadi would align with the Congress in Uttar Pradesh to form a government and hence it would provide all the necessary support for the government at the centre, especially if Mamata Banerjee stalls key initiatives.

She has already opposed Foreign Direct Investment (FDI) in multi-brand retail, which would not only have bought enormous foreign exchange into the country, but would also have generated fresh employment and benefited consumers.

Clearly, it may now get increasingly tough for the Congress to push through key reforms like the Direct Tax Code and the Pension Bill.

Mamata Banerjee has also opposed the proposed National Counter-Terrorism Centre. In such circumstances it would have made life very easy for the Congress, had it been able to support the SP government in UP and in turn receive complete and unconditional support at the Centre. Though it is presently already getting outside support from the SP at the centre.

The SP gains in UP and the added loss in states like Punjab and Goa, means that the Congress is set to become weaker, especially since it does not have a majority in the Rajya Sabha.

Stock markets which had gained in the morning session on hopes that the Samajwadi Party would rely on the Congress to form government in Uttar Pradesh declined immediately when it became clear that the Samajwadi party could form a government on its own. In fact, the sensex slipped almost 550 points from the day's high following a clear trend emerging.

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