MARKETS ALREADY CELEBRATING 16TH MAY?
By Ruma Dubey
The markets have jumped up over 600 points on the BSE today. Its more like a nonchalant jump; there were really no firecrackers burst on Dalal Street nor was there a sense of jubilation. It’s like a “shrugged shoulder”, “so what” kind of a rise.
This rally which we saw today, did not exactly spread any sense of euphoria because all know this is something like a pre-election rally. It is a given the BJP will come to power; the only permutation and combination which the market now seems to be working on a day-to-day basis is whether it will be 230 or 250 or 260. So no one on the streets is talking about 300 or above 272.
Just the mere fact that BJP will come to power, a foregone conclusion as such, is pushing up the markets today, above 600 points? Actually, what it means is that BJP wining anything above 200 would certainly mean that they will head the center and that is probably what the market is celebrating. What about the politics of coalition and its troubles? Well, today the various rhetorics that we see, right from Mamata to Mayawati, is probably all drama. Once the seats come in and there is no “Third Front” forming, they will all form a queue, sending “feelers” to form a coalition with NDA. At least that is how it has always been and there is no reason for any change now; there are no ‘ideological’ battles being fought here, it’s all about power and money.
Thus for the market to today celebrate a 230 seat win is right in that sense. But what about the travails of this “outside” support? Well, parties will join and quit but no one relinquishes power. They may have differences but few have the gumption to give up what they have. Today, the market is so fixated on just Modi that it has even decided to ignore the fact that BJP coming to power could mean no FDI in retail, which for the markets, a year or two ago, was such a big deal.
Today’s rise is thus that – just a rally. There is no real depth to this, which is why there is no euphoria or a sense of ‘lasting happiness’ in this surge. And going ahead, till 16th, we are sure to see such spurts. 12th will be a big day as it will give us important economic data through the day – IIP, CPI and balance of trade. And then after 6 in the evening, once the last phase of the polls are over, TV channels will go ballistic with their various Exit Polls. And rallies from 13th will be based on these exit polls. The economic data will all be completely ignored as today, in the face of a new Govt coming to the center, it holds little relevance. Even if the IIP numbers disappoint or CPI climbs up, markets will show a slight blip; a token reaction and then get back to politics.
Thus the markets presently are a reflection of only politics; nothing else will matter till 16th and the ensuing few days. And after that? No PM has a magic wand to make all wrongs into right. The new Govt will have to deal with unemployment, fiscal deficit, inclusive growth, growing inequalities, falling growth and rising inflation. And to top it all off, it will have to comprehend with El Nino and the miseries which poor rainfall could bring on the country. Yes, we have all these issues and it would take a while to bring any relief but a new Govt will bring that sense of hope and optimism which has gone missing.
In today’s meteoric rise, the realty index is a big gainer – people are hoping that once Modi comes, this sector will boom. Banking, capital goods, metal, oil & gas; all sectors are up in the green, the smallest gainer being FMCG. The sectoral indices thus reflect this new story of hope and optimism.
Do not get carried away by this rally; as a retail investor wait for a clear picture to emerge as currently, the bigwigs are having a gala time; when the sharks are out, the small fishes can survive only if they wait in the sidelines.