A new bull is born but has to stay in incubator for now

December 8 came and went. The expected BJP victory, which analysts were betting their billions on, has also come. The Sensex cheered it in early trade on Monday, asking questions on that 21,500 mark. But the conviction was short on supply.

The sweeping 4-0 win could have been seen as a mandate for the Narendra Modi wave the market was betting on. But what seems to have transpired is a vote for performing chief ministers in two central India states and a confirmation of Rajasthan’s habit of voting out the incumbent.

Would you still be convinced on a Modi wave, especially when we have seen voters mature enough to vote differently for Assembly and parliamentary elections? My most optimistic answer would be “not sure”.

If you don’t agree with this hypothesis, the bull is born for you. It is good to look for companies that are ideally placed to benefit from this future BJP government. It would not be a bad idea to look into the market data for 1999-2004, when the BJP-led  NDA government was in the saddle.

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Interestingly, that period was one of the more depressing ones for the Street. Dot com bust, 9/11 and the Ketan Parekh scam — everything that could go wrong went wrong. Yet, I am sure there would have been stocks that did well and those that didn’t. Fallen angels could be the rising stars and become the running partners for the young bull.

But life is never that simple. Delhi has provided a twist that has sown the seeds of doubts. Will Arvind Kejriwal’s sweeping jhadu fly him across the country turning into Harry Potter’s magical broom?

The Kaushambi crusader took just 14 months to go from taking the attack to the first household by attacking the son-in-law to denying the Delhi chief minister an entry into the Assembly she lorded over for 15 years. Can he make the next six months count? What if he does?

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In his present avatar, Kejriwal seems bad news for the Street. He is not going to be kind on cronies and their market capitalisation. And, they account for a good portion of market capitalisation. It would be good to move away capital from non-transparent, politically connected names and park it at a transparent one. But, finding one is not going to be easy, with the best of the names fighting scrutiny by probe agencies and cases in courts.  

Analysts are already hedging their bets. A HSBC Global  Research note, on Monday, said, “Despite the last couple of months of relative calm, India has not completely shaken its vulnerabilities to Fed tapering. It will, therefore, be important to further guard against spillovers by sticking to monetary and fiscal policy tightening, and stepping up implementation of structural reforms.”

It points out that “revenues are below budgeted levels” and “H1 budget deficit has reached 80 per cent of annual target.”

Now, when did you last hear concerns about fiscal deficit? Why are we hearing these after an election results day that was to mark the birth of the new bull concerns about fed tapering and fiscal tightening?

The bull is born. But, for now, it has to be in the incubator.