By Margarita Antidze and Hasmik Mkrtchyan
YEREVAN (Reuters) - Armenians looked set to return the two biggest parties in the ruling coalition to power on Sunday, in an election they hope will be free of the fraud and violence that marred the South Caucasus country's last national election in 2007.
President Serzh Sarksyan's Republican Party and Prosperous Armenia, led by businessman Gagik Tsarukyan, were expected to remain in charge of the former Soviet republic, and the poll is seen as a test of strength between the two parties.
More than 300 international observers from the Organisation for Security and Cooperation in Europe (OSCE) are monitoring voting. One observer said privately there had been violations.
Ink stamps on the passports of people who had already voted had disappeared within 15 minutes, giving them the chance to vote again, the observer said.
There were no reports of violence, an encouraging sign for the country of 3.3 million that wants stability to boost the economy, devastated by a war with neighboring Azerbaijan in the 1990s and then the 2008-2009 global financial crisis.
"I hope everything will be calm and peaceful, and everything transpires lawfully - today, tomorrow and the day after tomorrow," Sarksyan said after voting with his wife at the 9/11 polling station in the centre of the capital Yerevan.
Voters trickling to the polls in bright sunshine also hoped the election would be a landmark for democracy after criticism by international observers over Armenia's elections since the end of communist rule.
"I hope that not one or two, but several parties will be elected. It will help there to be discussions in the new parliament and laws adopted for the sake of people," Gohar Karapetyan, a 48-year-old teacher, said after voting at a school built in the Soviet-era and decorated with the national flag.
Voting was due end at 8.00 p.m. (1600 GMT) and an exit poll was due to be released shortly afterwards.
Eight parties and one party bloc were running for seats in parliament and 155 candidates were registered in 41 single-mandate constituencies.
The government previously included two other parties, but one pulled out in 2009, citing differences over foreign policy. The other coalition partner, Country of Law, may struggle to cross the five percent of votes threshold to enter parliament.
The parties have made social problems and economic issues the main slogans of an election campaign that has been unusually active for Armenia, Russia's main ally in the region.
There are no major differences in their economic programs, which call for more active development of domestic industry and continuation in cooperation with Russia as well as international financial organizations.
Analysts say the Armenian National Congress, a coalition of opposition groups led by former President Levon Ter-Petrosyan, could make it into parliament after leading street protests since he lost the 2008 presidential poll to Sarksyan.
"I'll accept any results if elections are held without violations," Ter-Petrosyan told reporters after casting his ballot at the same polling station as Sarksyan two hours later.
A blast at a campaign rally injured about 150 people on Friday, raising fears of a repeat of the violence that killed 10 people after the 2008 presidential election, but emergency officials said it was caused by gas-filled balloons exploding.
Armenia nestles high in the mountains of a region that is emerging as an important transit route for oil and gas exports from the Caspian Sea to energy-hungry world markets, although it has no pipelines of its own.
Although a ceasefire was reached in 1994, its conflict with Azerbaijan over the tiny Nagorno-Karabakh region remains unresolved and a threat to stability.
Relations with another of its neighbors, Turkey, are also fraught because Ankara does not recognize the killing of Armenians in Ottoman Turkey during World War One as genocide.