Greed is back on the Indian stock market. The bourses tripped in their exuberance to greet an unshackled Manmohan Singh. The 17.24 per cent rise in the Sensex before trading was halted on Monday hoists it to a pole position among world indices. Even then, it is not overpriced. The Sensex has, at 15.6, doubled its price-earnings ratio since November, but still trails China’s index at 26.8.
Expect, as the world seems to be doing, more fireworks when the news flow from New Delhi turns rosier. Morgan Stanley, a US brokerage, reckons Indian shares will outperform emerging markets by 25 per cent over 12 months.
The big bets are on sectors that will figure prominently on the Congress agenda to keep the economy growing at above 8 per cent. The top two gainers in the few seconds of trading on Monday were, naturally, infrastructure companies Bharat Heavy Electricals (up 32.72 per cent) and Larsen & Toubro (29.53 per cent). BHEL, for instance, expects Rs 7,000 crore in orders as the government clears projects held up by the month-long elections.
Real estate, capital goods and energy were among the best performing sectors on the Bombay Stock Exchange, in expectation of a renewed focus on the nation’s overburdened roads, ports and power plants. Some of these ministries had run aground in the cross-currents of coalition politics; the Congress is now in the happy position of keeping them out to itself or farming them out to like-minded alliance partners.
Five years ago, almost to the day, the Sensex had plunged 11 per cent, skittled by the prospects of Communists blocking privatisation. This time around divestment, being a rare pre-poll Congress manifesto promise, ought to keep the stock market buzzing for some time. Proceeds from the government’s holdings in a wide spectrum of enterprises can fund a chunk of the social spending that has yielded the Congress its handsome election dividend.
A transfer mechanism is in place in the form of the National Investment Fund, it just needs to be activated. The benefits of rolling back government from business have never been in doubt. The investor is on board. The mandate for the Congress should make it easier to get the rest along.