By Satarupa Bhattacharjya and Frank Jack Daniel

NEW DELHI (Reuters) - Indian lawmakers voted for a new president on Thursday, ending weeks of wrangling and opening a much-hyped political window billed as the best chance for Prime Minister Manmohan Singh to launch a wave of reforms and reverse an economic slowdown.

India's markets are anticipating quick action to relax investment rules and cut subsidies once the voting for the ceremonial post is out of the way. Stocks and the rupee outperformed other Asian markets this month after Singh suggested he will act after the election.

Analysts warn of a slump in investor confidence if anticipated measures do not materialize.

"This is a make or break situation for the government," said Rupa Rege Nitsure, chief economist at the Bank of Baroda, Mumbai.

"They have to come up with one or two really solid reforms first, otherwise they will be blamed for having been responsible for having triggered the lowering of India's credit rating to junk grade."

Singh assumed the additional role as acting finance minister in June, replacing Pranab Mukherjee, who resigned to run for president, a race he is almost certain to win after gaining support of allies. The president is elected by 4,896 lawmakers in state assemblies and the national parliament in Delhi and results will be announced on Sunday.

Mukherjee has only one opponent who does not have much support.

Mukherjee's strength signals a political victory for his Congress party after a string of reverses in state polls earlier this year, and could provide the bedrock for the ruling coalition to at least start its reform program.

Launching reforms is becoming increasingly crucial. Hampered by muddled policy and the global slowdown, India's economy grew at its slowest rate in nine years in the March quarter. Inflation is high and the rupee has slid some 20 percent against the dollar since last year as the current account deficit widened.

The government has indicated the period between the election and the start of parliament's monsoon session on August 8 is a good time to implement rules allowing foreign investment in supermarkets -- a policy Singh introduced last year but quickly abandoned after protests in parliament and on the street.

Trade Minister Anand Sharma was due to travel to the farming states of Haryana and Punjab on Thursday to rally support for the policy, which the government says will help restore investor confidence and fix food supply problems. Critics say it will hurt farmers and destroy small shop-keepers' livelihoods.

Opposition from West Bengal chief minister Mamata Banerjee, the biggest partner in the Congress-led coalition, forced the U-turn on retail trade policy in December. But the government feels emboldened by the presidential vote and Singh may be less cowed this time round.

"The political environment right now is much more favorable," said a senior government official who works on economic policy.

One of India's leading businessmen, Ratan Tata, said in a Twitter message: "Now is the moment when our prime minister must break convention, restore government credibility, place the country on a growth path once again by implementing promised reforms."

OPPOSITION WITHIN THE PARTY

The official said the new retail policy was likely to be adopted either before the parliamentary session, or in September, which is considered another political window before state elections in the western industrial hub of Gujarat at the end of the year. Continued...