Portugal's center-right coalition clinched a national election win Sunday but failed to claim an outright majority of the votes, setting the stage for a period of political instability and policy wrangles, analysts warned.

With 99.1 percent of districts in the country counted, the ruling coalition "Portugal Ahead" had secured around 38.5 percent of the vote while Socialist opponent Antonio Costa had 32.4 percent, Reuters reported.

The final count will not be available until late on Monday but, for now, the results showed the government with just 100 seats in the 230-seat parliament - well short of the 116 it would need for a majority.

Following the result, incumbent Prime Minister Pedro Passos Coelho said he was ready to form a government. The vote was widely seen as a referendum on austerity – a central tenet of Coelho's government since 2011 when Portugal received a 78 billion euro bailout ($87.5 billion) and had to implement reforms and unpopular spending cuts and tax rises.

Forming a government could be easier said than done and a lack of majority – which means the opposition could scupper the government's policy program -- could come back to haunt the coalition, analysts believed.

"Clearly, the coalition won and certainly the opposition didn't win," Stephan Morais, executive director of Caixa Capital, told CNBC on Monday. "But having said that, it could be argued that everybody lost -- the opposition didn't win but the government lost a majority."

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"It's s tough road ahead to a certain extent. We'll see now whether the socialist party allows the coalition to move forward with certain reforms."

Despite the lack of a decisive win on Sunday, Passos Coelho vowed to continue with his government's pro-austerity policies, which have been attributed to helping the country's strong economic recovery.

The ruling alliance's lack of majority does not bode well, however. Apart from the fact that no minority government has lasted a full term since Portugal became a democracy in 1974, according to Reuters, policy wrangles could lie ahead as the coalition tries to form a government with the support of parties whose policy stances differ.

Antonio Barroso, vice president of risk consultancy Teneo Intelligence said in a note Sunday that the process of forming a government could be "messy."

"Despite its defeat, the ambiguous attitude of the opposition Socialist Party (PS) means that government formation could be difficult in the coming days, although incumbent Prime Minister Pedro Passos Coelho is still likely to be re-appointed," he said.

"However, the good result of the extreme-left Left Bloc (BE) will force the socialists to harden their stance towards the government, which does not bode well for political stability over the medium-term."

Over the next few days, Portugal's President Anibal Cavaco Silva will receive the different party leaders and will explore the available options for forming a stable government.

With socialist party leader Antonio Costa declaring he would not resign despite his party's defeat, "he also maintained an ambiguous line regarding the appointment of the new government, suggesting he will not make things easy for Passos Coelho," Barroso said.

Not only does Passos Coelho face the not-so-easy task of re-election, he has then to face the hurdle of submitting his policy program to a vote in parliament, Barroso said. If opposition parties chose to reject the program by an absolute majority vote, it would lead to the resignation of the government, he warned.

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt. Follow us on Twitter: @CNBCWorld

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