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AK-Nomics: The Sensex party and the political sandwich

Can the political scenario get better or worse than it is, in the context of the Sensex? Ashok Kumar tells us about the possible post-poll scenarios which can affect the Sensex.
Hindustan Times | By Ashok Kumar
UPDATED ON OCT 10, 2007 12:04 AM IST

Even as the bell-weather BSE Sensex plummeted at the start of this week, most market commentators jumped on the 'political uncertainty' bandwagon. That the Sensex had risen like the proverbial Phoenix by 3500 odd points after a US sub-prime hiccup not too long ago was conveniently forgotten. Be that as it may, can the political scenario get too much better or worse than it is, especially in the context of the Sensex ?

To answer that question, let us assume for a minute that mid-term polls are indeed round the corner, simulate a few possible post-poll scenarios and see how it would affect the Sensex.

In the first scenario, the Congress led UPA coalition returns to power minus the Left Front baggage. Given the dog-in-the manger attitude displayed by most Left Front constituents right through the tenure of the current coalition Government, this would sound like a God-send to stock-market participants. However, they will need to rein in their excitement here as the likeliest replacement for the Left Front would be the mercurial BSP.

At the end of the day, stock-market participants can live with this scenario and continue their seemingly never ending party at the bourses.

The second scenario could be the resurgence of the BJP led NDA coalition and its ascension to power. Given that this stock market boom commenced during the tenure of the BJP led NDA Government of the first half of this decade, chances are, market participants will welcome this development.

However, like the last time two times when it led a coalition, the BJP will have to live with the shenanigans of regional satraps who will extract their pounds of flesh at regular intervals. Once again, like in the case of the first scenario, stock-market participants can ignore these pin-pricks and continue their revelry.

The third scenario could revolve around yet another “Third Front” experiment involving a hotch-potch of several regional parties with the Left Front playing the anchor role and a sulking Congress party providing outside support. Given the way the stock markets have behaved every time such an experiment has been foisted on the country, chances are the revelers at the bourses will have to pack up and return home for a while.

An utopian (at least for now) scenario for the market would be a national government born out of a working coalition between the Congress and the BJP. However, as the saying goes, "if wishes were horses, beggars would ride". But you cannot rule out anything in politics, especially in India.

So, should we really be terribly worried if the Government falls and mid-term polls are announced? Given that the chances of the third scenario emerging appear negligible as of now, methinks not. Not yet, at least.

The writer is CEO, Lotus Knowlwealth, a knowledge based consulting firm.

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