* Opposition PDI-P party in front but not as dominant as predicted
* Islamic parties unexpectedly appear to win more votes
* Campaign notable for lack of policy initiatives (Recasts with updated quick vote counts)
By Kanupriya Kapoor and Rieka Rahadiana
JAKARTA, April 9 (Reuters) - Indonesians voted for a new parliament on Wednesday with initial counts showing the main opposition party ahead but less convincingly than expected, meaning it might have to make deals with other parties to nominate its candidate for president.
In another surprise, Islamic parties appeared to have won more support than predicted. Though Indonesia is home to the world's largest Muslim population, many analysts thought Islamic parties were losing their appeal because of graft scandals and the greater popularity of more pluralist parties.
The main opposition Indonesian Democratic Party-Struggle (PDI-P) had been expected to easily win enough votes to nominate popular Jakarta governor Joko Widodo, who is widely known as Jokowi, as its candidate in a July presidential election.
Opinion polls indicate Jokowi will easily win the presidential vote but early quick counts on Wednesday suggested his party might not win enough votes to let it nominate him without forming a coalition with one or more of the 11 other parties contesting the parliamentary vote.
"Parliament is likely to be very fragmented because many parties have gotten a relatively big share of votes, and their bargaining power will be pretty much the same," said Philips Vermonte, political analyst at Jakarta-based think-tank CSIS.
"This will have a big influence on the new president because he'll have to pay attention to the situation in parliament and the many political players there."
Party officials put on a brave face.
"Hopefully ... PDI-P will able to meet the target of above 20 percent, so we can nominate Joko Widodo as presidential candidate," said Puan Maharani, daughter of party chief Megawati Sukarnoputri.
The party needs 25 percent of the national vote, or 20 percent of seats in parliament, to nominate Jokowi on its own.
After 80 percent of vote results were compiled by CSIS from 2,000 polling booths across the world's third largest democracy, PDI-P had 19 percent of the vote.
ISLAMIC VOTE INCREASES
The quick count also showed that the five Islamic parties had won 32 percent of the vote, up from 29 percent for eight such parties contesting the 2009 election.
Indonesia, Southeast Asia's biggest economy, has about 500,000 polling stations and more than 186 million registered voters.
The resource-rich country's embrace of democracy since the downfall of former authoritarian leader Suharto 16 years ago has seen four different presidents and repeated change of the leading party.
News of the weaker than expected performance by PDI-P put some pressure on the rupiah in the offshore market.
Predictions of a Jokowi presidency and strong showing by his party hade helped lift shares prices and the rupiah, Asia's best performing currency this year, in the hope that it would bring a more decisive government.
The stock market, up 15 percent this year, was closed as Wednesday was declared a public holiday for the vote.
Campaigning has been notable for its lack of policy initiatives to give the economy a boost. Growth is expected to be a little more than 5 percent this year, but has weakened partly on the fall in commodity prices.
Jokowi has offered little clue to his policies but his popularity rests heavily on his no-nonsense style in running the capital, demanding his bureaucrats perform their jobs properly and by focusing many policies on improving the lives of ordinary Jakartans.
GOLKAR AND GERINDRA
The two main parties behind PDI-P, were Golkar, one-time parliamentary vehicle of the long-serving Suharto, and Gerindra which is led by ex-general Prabowo Subianto.
Early results suggest both will struggle to meet the threshold to contest the presidency, suggesting there will be intense horse-trading to form coalitions.
Backing for the ruling Democratic Party of outgoing President Susilo Bambang Yudhoyono has fallen to single digits after it was hit by a series of high-profile graft cases last year. Yudhoyono is limited by the constitution to two terms.
Yudhoyono is Indonesia's first leader to be chosen by direct election.
"Even though we are still fixing and perfecting the system of holding these (elections), once again Indonesia can be grateful because our democratic journey is going the right way," he told reporters.
Voters, nearly a third of them under 30, chose between 6,600 candidates vying for national parliament seats. Elections were also held for 19,007 provincial and district legislative assembly seats.
Most Indonesians view parliament as among their country's most corrupt institutions, according to a 2013 Transparency International survey. Under the presidential system, however, the executive branch has the authority to overrule it. (Additional reporting by Anastasia Arvirianty, Fergus Jensen and Randy Fabi,; Writing by Jonathan Thatcher; Editng by Robert Birsel)
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