What now?
The stock price of Heritage Foods Limited, a milk processing company based in Andhra Pradesh, promoted by the family of N. Chandrababu Naidu (leader of Telugu Desham Party and CM of Andhra Pradesh) rose ~65% in the last week. The rise in stock price is apparently in response to the victory of Mr. Naidu’s party in Andhra Pradesh Assembly elections and the likelihood of it getting a pivotal role in the central government. Stock prices of many PSEs and companies perceived to be close to victorious NDA partners witnessed heightened volatility and lost 8-15% value after election results. What does this market behavior tell us? Does it show that the market participants seriously believe that the elected Chief Minister of an Indian State, will “unduly” favor his family business? Or the working of a PSE depends on the number of MPs a ruling party (or coalition) has in the Parliament? Or the fate of a business in India materially depends on the closeness with the ruling party enjoyed by its pro...