The ruling alliance, led by the Nepali Congress party of Prime Minister Sher Bahadur Deuba, and the main opposition Nepal Communist Unified Marxist-Leninist (UML) party need the support of smaller groups to form a new government.

Nepal, a country of 30 million people that is squeezed between China and India, has seen ten government changes since the abolition of 239-year-old monarchy in 2008.

The political instability has hit economic growth and spooked investors.

The ruling alliance secured 136 seats in the election, two less than the required majority of 138 in the 275-member House of Representatives. The UML and its allies won 92 seats.

A statement from President Bidhya Devi Bhandari’s office said: “Any member of the House of Representatives, who can command the majority with the support of two or more parties” should stake a claim for being appointed as prime minister by 5pm (11.15am GMT) on Dec 25.

“We will discuss within the (ruling) alliance and with other political parties about the formation of the new government under our leadership,” Nepali Congress party spokesman Prakash Sharan Mahat told Reuters.

He said Deuba, 76, was a frontrunner to be appointed prime minister for the sixth time.