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Congress Wins, Poised for a Big Rally?

The Congress has won handsomely in the elections, with over 260 seats by the coalition – a majority is 273, which they can get with very marginal help.

The BJP wasn’t quite the loser – only losing about 18 seats with the NDA going to 160. The losers really were (thankfully) the Left, which got routed in Kerala and West Bengal, and the “third and fourth fronts”. Most importantly, Behen Maya Wati is not anything of consequence, the SP has substantially reduced clout as the Congress bumped itself up in UP, and Paswan drew a blank. Amma in TN didn’t turn out to be a big deal, and Chiranjeevi in AP got a few seats but the UPA won the assembly. Rajasthan stuck with Gehlot – the Raje factor must have been prime in people’s minds.

The losers in the election were the people who thought they could influence the outcome, by dictating what it will take for them to support the almost-won. Most of them now say “We’ll sit in the opposition” like they have any real choice.

The BJP has drawn itself into a corner; with Advani looking like he’ll quit politics (and about time, darnit) and Modi being a very scary alternative for a future PM.

Markets on the other hand will take this positively. It looks like they will open with a serious gap up on Monday, and the pundits say it will last a while. At least for the few days it will take to realise this was not a useful election to win.

The world crisis is far from over, and our Indian version has barely begun. From a political perspective, the budget will be important – at least to understand tax implications. Plus, of course, who’s the FM, if PC is offered the Home portfolio instead. More importantly though, the room for fiscal jugglery has shrunk considerably. Now, the economy has to recover pretty much on it’s own. The tax situation will soon show to be dire – collections will fall, quite dramatically, over the year. So I doubt there will be tax exemptions – if anything, they are likely to shut down or impair all the zero-export-income-tax schemes.

There isn’t likely to be much inflation, but unless a real urban CPI comes up it’s difficult to say where we are at any given moment – WPI seems to be malleable. There is a small hope for further disinvestment and for freeing up the oil business. But it’s a rare time when Congress has a majority and stays non-commie – other than that one spark of goodness in the liberalization of 1992, which was admittedly done staring down the barrel of a gun. The whole Gandhi family has been commie from the start, and even now, with the huge Loan Waivers and fert subsidy, I see commie-ness thriving. Not only is the recovery going to be tough, but if there’s enough commie attitude, it could take as long as the US (which is in substantially deeper doo-doo).

That requires more articulation. Meanwhile enjoy the markets while they last, and I think I will soon revive the short-only-strategy. Let the 4000 arrive!

  • GG says:

    >I’d appreciate a heads up whenever you think it’s a good time to start shorting again…I’m darn tired of this stupid rally. So far I have tried to short this thing twice – at the 200 DMA and then at 3700 – made a few bucks – nothing spectacular – but looks like tomorrow’s rally is gonna throw me a lil’ bit in the red. Damn!

    BTW, almost EVERYBODY has been/is calling for a rally post UPA’s win. Shouldn’t that be a contrary indicator? Hoping I won’t end up in the red tomorrow!

  • GG says:

    >Also, given the current dire straits of India’s export markets, Indian media’s optimism seems demented to me at best.

  • Anonymous says:

    >There is no denying of fact that Indian Markets are coupled to global markets than to Local Events (except for short term).

    The Global Markets have still to retest the March 9th Bottom. It may even overshoot to the downside. In such a case UPA victory rally may soon be forgotten. Some Experts like Gary Shilling are of the view that Oct will see the real Global Market bottom.

    Other experts like Shiller, Krugman, Roubini also say this is a bear market Global rally.

    With American Consumers switching to saving mode from spending more, Indian exports will be seriously hit.

    This UPA rally will be short lived.

    Enjoy small ride before the plane explodes.

    ANON-1

    ANON – 1

  • Deepak Shenoy says:

    >It does look like tomorrow, if a big gap up, will be the ultimate sucker move. 18 P/E and counting – so we’ll go back to the 25s? It isn’t yet time to short – best to wait for a technical signal before jumping in. Something, an MA cross, an RSI breakdown or simply, a 20 day low breached. Otherwise too early to short – I like the overpriced fin-services for them. ANd of course, RE.

  • Siddharth says:

    >wow. Thats rocket. Couldnt have imagined either.

    Honestly I am very happy that the outdated elements in the decision making process are left to nothing, e.g.left and others as well.

    Though I am against age descrimination but hey I agree with you Advani must go. Why cant gray hair stay in the think tank of the party instead sitting in positions for so long so as to deprive the newer generation of policy making? In that sense I guess theres a huge generation gap between the young voter today and the elderly politicians. Its funny but feels sick to the stomach that some cant even walk, talk without taking a breathe, what does it show to the country that youth is not capable of the politics.

    Deepak surely this time it is very emotional. In my place two candidates who have gone on their own have won, mind it, defeating party candidates who were supported by 4 MPs 6 MLA’s. Angst has come out afterall.

    Wonder what will be the fin services and RE P/E’s now! 🙂 Good meal when the time comes eh?

    cheers mate