Do it yourself

Bihar assembly elections concluded last week with the incumbent NDA government registering an astounding victory, belying all expectations of anti-incumbency; a strong show by the opposition alliance (MGB); and a surprise by JSP (Jan Suraaj Party), floated by election strategist-turned-politician Prashant Kishor. Almost every exit poll and ground report got Bihar 2025 spectacularly wrong. The NDA’s landslide was not a wave — it was an annihilation. In my view, the result was a foregone conclusion for anyone who looked beyond Twitter trends and Tejashwi’s viral reels. Numerous independent forecasters, reporters and experts, who claimed to have spent weeks “on the ground”, completely failed to assess the likely outcome of the elections. The opposition alliance completely lacked seriousness, strategy and resources; notwithstanding the social media noise. The new challenger JSP lacked resources and credibility (was mostly seen as a BJP agent put up to cut into opposition votes). They were ...

 The final budget presented by the finance minister has shaken the market cart, and added material uncertainty to policy making. The efforts to minimize uncertainty after demonetization have thus been negated to some extent. As has been the practice in the past few years, the budget speech of the finance minister materially diverges from the actual budgetary provisions. By changing the capital gain tax regime and mentioning that they are working on a new Income tax law, they have forced the stakeholders to build-in a higher degree of policy uncertainty and unmindful regulatory provisions in their business and investment plans. Claiming simplification while introducing new complications (e.g., more transactions under TDS/TCS) has been a hallmark of the taxation policy in recent years. Use of technology is invariably claimed as an achievement, as if there is an option. The level of uncertainty could be gauged from the fact that the priorities outlined in this budget are materially ...

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...

The ongoing celebrations of the Festival of Democracy shall end on 4 th June 2024, with the announcement of election results for the 18 th Lok Sabha. In the past two months, the market narrative in India has pivoted around the election outcome. Even though 4QFY24 earnings did impact the performance of specific stocks materially; speculation about the election results has mostly dominated the sentiments. Once the elections are over and the contours of the new government are clear in the first fortnight of June, the focus will shift to the presentation of a full budget for the current financial year. To keep the tradition, only an interim budget (vote on account) for FY25 was presented in February 2024 to run the government till a new government is formed for the next five years. A final budget is expected to be presented by the new government in the last week of July 2024. Some media commentators and market experts have attempted to sketch the final budget based on the election sp...

Verdict 2024: Market Implications An analysis of the past 30 years of market trends provides no evidence to suggest that elections, the form of government, or the strength of a particular party in the parliament impacts the market performance significantly. However, it is common to see higher volatility during or around elections. Insofar as the fear of a multi-party coalition or a fractured mandate is concerned, I believe, the investors should be relieved by the prospects of a true coalition coming to power. Because, in the post-independence era, the best periods for the Indian economy have been those when a “coalition” government was in power. It is however important to note that by “coalition” I do not mean just a multi-party government. In my view, coalition government means where people with diverging socio-economic policies jointly participate in a government. Empirical evidence suggests that such coalition governments in India have agreed on a common minimum agenda and foc...

“Did you notice that no politician takes moral responsibility for any wrong these days!” In the past two months, many readers have asked about my expectations of the outcome of the ongoing general elections and the likely impact of it on the Indian economy and financial markets. I am glad to offer my opinion, with the rider that I am an independent observer of Indian politics and have no affiliation or inclination towards any particular political party or group thereof. Economic impact I believe that in India economic policies, and therefore financial markets, are politics agnostic. I do not see the outcome of general elections impacting the Indian economy in any significant manner. A study of the history of Indian politics would suggest that, unlike the Western democracies, only an abysmal minority of Indian voters are strongly committed to a political or socio-economic ideology. Contemporary issues, personalities, and election promises usually dominate the political discourse...