FRANKFURT (MarketWatch) -- German stocks and nuclear power plant operators in particular rose, while solar-related companies dropped Monday after election results indicated that a center-right coalition will be formed.

In Sunday's election, Chancellor Angela Merkel's conservative CDU/CSU bloc won 33.8% of the vote, while the pro-business Free Democratic Party (FDP) captured 14.6% of the vote, according to projections by German television ARD, allowing for the creation of a center-right coalition. Read more about the election.

"The German market usually performs better after CDU/FDP wins," said Martin Lueck, economist at UBS, in a note to clients. "Last night's outcome should therefore be good news for the market."

Germany's center-right parties generally want to reduce taxes and create investment incentives.

The German DAX benchmark (DAX) rose 2.8%, outperforming other stock indexes in Europe. See Europe Markets.

"A conservative-liberal coalition has room for bringing about far-reaching reforms," said Thorsten Polleit, chief German economist at Barclays Capital, in a conference call. By liberal, the economist is referring to free-market policies that the FDP espouses.

"The key issue for the new government is clearly fiscal policy," and a CDU-FDP coalition can be expected to put together a new budget plan for next year, Polleit said.

"Improving the fiscal situation should be possible under the new government, but it may not be achieved in the short run," he said. The FDP is also likely to push for creating a simpler and more transparent tax system, reducing red tape and reforming the banking sector, according to Polleit.

Utilities gain

The owners of Germany's nuclear power plants rose.

E.On AG (EOAN) surged 3.6%, RWE AG (RWE) gained 4%, and EnBW Energie Baden-Württemberg AG (EBK) rose 2.6%.

A CDU-FDP coalition is likely to extend the lifetime of existing nuclear power plants to give Germany more time to reach its renewable energy goals.

In Germany, nuclear energy accounted for 23.3% of power production in 2008 and capacities are owned by the big four utilities: E.On, RWE, EnBW, and Vattenfall AB, which is wholly owned by the Swedish state.

The lifetime of power plants might now be extended by a further 15 to 20 years, wrote Christian Kleindienst, senior credit analyst at UniCredit Research in a note to clients.

"As a nuclear power plant has very little variable cost, a transfer to other fuel sources or power purchases could have led to a massive decline in cash flows on the magnitude of several billion euros for all four operators, depending on future power prices," Kleindienst said.

However, a possible extension might not be granted at zero cost, Kleindienst said, adding that there are already discussions about a renewable fund model in which nuclear operations have to pay in a certain part of the extension gains.

Solar shares decline

Shares of solar companies, however, posted losses on concerns that a center-right coalition will cut the feed-in tariffs from which the industry benefits.

SolarWorld AG (SWV) fell 0.2%, SMA Solar Technology AG (S92) dropped 0.4% and Q-Cells (QCE) declined 2%.

Bucking the trend, Phoenix Solar AG (PS4) gained 2.1%.

"We feel markets are wrongly pricing solar stocks down as recent statements from the liberals suggest they will only seek steep solar tariff cuts for 2011" rather than for 2010, said Robert Schramm, analyst at Commerzbank, in a note to clients.

That suggest a "massive demand pull-forward" and the main beneficiaries should be Phoenix Solar, SMA Solar Technology and SolarWorld, Schramm said. Read more.

The construction sector, including Essen-based Hochtief AG (HOT) and Mannheim-based Bilfinger Berger AG (GBF), should benefit from the CDU/FDP's higher propensity for privatization and public private partnerships, according to Lueck of UBS.

Shares of Hochtief rose 1.6% and Bilfinger gained 3%.

Lueck also advised caution on Deutsche Boerse AG (DB1), "because introduction of financial market turnover taxation remains an issue even under a CDU-led administration."

Deutsche Boerse shares slipped 0.9%.

Investors should also be cautious on Rheinmetall AG (RHM) since a strong FDP within the government may mean earlier-than-expected withdrawal of troops from Afghanistan, which could limit Rheinmetall's potential sales to the German army, according to UBS.

Shares of Rheinmetall, a Düsseldorf-based producer of automotive components and defense equipment, rose 3.6%.