STOCKMARKETS are known to be fickle. But in this period of unsurpassed political uncertainty, rather than hedge their bets, they have, from all appearances, consistently reposed their confidence in a BJP government, that is, till it came to power.
Take May 9, by when trends from over 400 constituencies were clear and the NF-LF combine seemed to have the best prospects to form a government with Congress support. The BSE Sensex dropped by 73 points to close at 3694.30. This slide was largely engineered by foreign institutional investors (FIIs) who stopped buying. In fact, after the BSE shut for the day, blue chips fell even further in kerb deals. Reliance, which had closed at Rs 243.25, sank to Rs 236. On May 10, there was bad news for the NF-LF from Bihar and Orissa, and Atal Behari Vajpayee met the President to stake the BJP's claim to form the next government. The stockmarkets arrested their slide. Though the Sensex ended the day only 0.09 points higher than the previous day's closing, stability had returned.
By the time markets opened after the weekend on May 13, the NF-LF had decided on Jyoti Basu as its consensus prime ministerial candidate. For the first time in nearly a week, the bulls and bears reacted more to market forces than political events. The Sensex rose 57 points on speculative buying, before closing a point lower. The reason for this buying spree was that the 'no-delivery' period came into effect due to book closures for payment of dividend. And despite the fluid political scenario that prevailed throughout the day, the market seemed to have discounted for it already as the bulls had a field day.
That evening, the CPI(M) refused to be part of an NF-LF government which would be dependent on Congress support for survival. Courtesy this uncertainty, the stock-markets saw the BJP's chances brightening, and on May 14, the Sensex improved upon the gains made the previous day, rising by 60 points. By the time the NF-LF elected Deve Gowda as their prime ministerial candidate around 7 pm, stockmarkets around the country had shut shop for the day and even kerb trading was at a low ebb.
It was on May 15 that the NF-LF had its revenge on the bourses. With Deve Gowda's election as the NF-LF candidate, its prospects brightened and the Sensex plunged by 81 points as soon as trading began. But then news arrived that the President had called Vajpayee to take the first shot at forming the government. That brought the bulls back into business. There was massive speculation buying and the Sensex recovered a fair amount of lost ground, eventually losing only 14 points at the end of the day's trading.
Akin to the political scenario that prevailed, the market itself was mired in confusion on May 16. The day began with heavy speculative buying and domestic financial institutions are alleged to have bought select scrips. However, FIIs were reported to have kept their fingers crossed and their wallets zippered. In the morning session, the market seemed to feel that a stable government would be installed at the Centre before long, but that sentiment began to change by the afternoon as brokers began doubting the staying power of the Atal Behari Vajpayee Government. Though the market rose by 83.26 points in the first half of the day, it tumbled as the day progressed and eventually recorded a mere 26 per cent increase over the previous day's close.
This negative sentiment was further accentuated on May 17, when the Sensex fell by 27.15 points to close at 3795.96, Finance Minister Jaswant Singh's encouraging pro-reform statements notwithstanding. Clearly, punters were losing hope that the BJP Government would last.
But what market observers find remarkable is the tenacity the bourses have displayed over the week. Despite the fluid political scenario, the Sensex has seen more highs than lows, largely because the elections and the post-election scenario had already been accounted for.
