There comes a time in every individual's or a nation's life where they stand at crossroads. Similarly, the Congress party has come to a point where they are at a crossroad. The next 24 months will decide where the party goes, and consequently where India goes. Our stock markets will be a reflection of where India is headed to.
In 1998, Sonia Gandhi took over as the Congress President. The Congress Party was in shambles. The BJP was riding a wave of Vajpayee induced euphoria, the Congress tally was plunging and no one gave the party a chance. Under Sonia, the party was losing election after election and no one gave the Congress much of a chance. Elections in May 2004 shook the nation and also shook the stock markets when Congress with the Left Front support came to power.
Sonia's masterstroke was yet to come. She stepped out of the race for the Prime Minister when the seat of power was hers to take. In one swift move she took the wind out of the sails of all those baying for her foreign origins. Manmohan Singh, an apolitical person, world renowned economist and more importantly a person with no political power took over as PM.
UPA - 1 was all about reforms. The Right to Information bill, the NREGA and the Nuclear bill being passed. In May 2009, the Congress came back to power minus the baggage of the Left Front. With great expectations come great responsibilities. It has been downhill after that with scams breaking out, inflation pinching the pockets of the Aam Aadmi and Congress being bruised in the by-elections.
Now, the news is Rahul Gandhi will become the Congress President, the 6th member of the Nehru Gandhi family to take over the reins of India's most influential party.
We have the elections in Uttar Pradesh in early 2012. The Congress has tied up an alliance with Ajit Singh who is powerful in Western UP. The Congress may emerge as the kingmaker as there seems to be no clear winner in UP. The Samajwadi Party, BSP, BJP and the Congress seem more or less equally placed with Mayawati edging ahead at the moment.
The real test of Rahul Gandhi will come in 2014. The Congress at the present moment is badly placed and is vulnerable to a defeat.
It is a real possibility that Manmohan Singh would be replaced in early 2012 after the elections in Punjab and Uttar Pradesh are out of the way. The most likely candidates to replace him are Pranab Mukherjee and P Chidambaram. The joker in the pack is someone like Kamal Nath.
It makes very real sense to replace Manmohan Singh. The scams and inflation have taken a toll on his image. It will be almost 7.5 years of him being in power. Time to have some old wine in new bottle.
The 3 leaders mentioned above have the same characteristics of Manmohan Singh. None of them are mass based leader and can never pose a threat to the Gandhi family.
Rahul Gandhi taking over as Prime Minister is the Ace in the Congress Pack ad I do not think, they will deploy that so early in the game.
What happens if Congress does not win in 2014?
There can be 2 alternatives. A NDA coalition coming to be power led by someone like Nitesh Kumar who has the credibility for good governance or a hotch potch Third Front government riding on the crutches of the Congress Party. This would lead to a repeat of the uncertainty of 1996-1998 period where the markets went no where basically.
Sonia Gandhi has left her footprints on the sands of Indian Political history. Let us wait and watch what Rahul Gandhi does.
Now, we come to our markets. Keeping all this in mind, I do not see the markets running away anywhere in a hurry. The crystal ball will become clear only sometime in mid 2012- 2014 period.
Now is the time to pick up blue chip stocks at good valuations. Invest in companies which will do well, keep 2015 as the target in mind.
For those interested in a selection of good stocks, Lakshmi has a pretty good collection very reasonably priced. One may contact her for her Investment Cherry Picks.