The ballots are counted and the victors have been declared. Who are the real winners and the losers? Are the election results a mirror to what is going to happen in the next 6 months, general elections? Let us try and explore. How will the markets react? Lot of questions to answer.
1. First things first. Whatever be the minor change in positions after now, the message is clear, the voters want the Congress out. The party has been almost wiped out in Delhi, in Rajasthan and Madhya Pradesh they have won very few seats. If the BJP can secure almost 2-3rd majority after 10 years in power in MP, it means Congress may eventually get wiped out from the Hindi heartland. Remember, no party can afford to remain out of power for almost 15 years in a State, the cadres start deserting the party.
2. In Delhi, the Congress will finish a poor third. This sends out a very strong message. The voters are fed up with the Congress. They will prefer anyone else but the Congress. Even the unkown Aam Aadmi Party will do. The results put the AAP in the best position of the 3 parties in Delhi. They can continue with their shrill rhetoric till the General Elections. As the Oppositio party, they can ask questions. If they had won, they would have to give answers soon.
3. Rajasthan has been a whitewash for the Congress. Losing a elections after 5 years in power is fine but this is a whitewash but with the opposition winning almost 75 % of the seats is a bit too much. The Congress may get decimated in Rajasthan.
4. The only silver lining for the Congress is the Chattisgarh elections. Here also, they had the advantage of 10 years of anti-incumbency factor, the sympathy factor for the massacre of their leaders and yet they are neck and neck with the BJP. A few seats here and there. No decisive mandate in their favor.
5. What does this indicate for the 2014 elections? A NDA led formation or a Third Front khichdi leading to instability. There may be 1 more general election about 2 years from this one. This reminds of the 1996 scenario where for 2 years we had the Third Front propped up by the Congress and then BJP coming with a mandate in 1998.
6. The ball will now be in Narendra Modi's court. If he can keep up the momentum and continue with the pace of rallies, the BJP may just be in power. Remember Modi needs just around 200 seats, with 200 seats the allies will come. Power is a magnet for the allies, idealogies be damned.
7. Where will the 200 seats come from? UP and Bihar are rich harvest states. Karnataka has Yeddyruppa coming back. Gujarat Maharashtra, Rajasthan, MP, Punjab, Delhi are few more friendly States. In the South, they would need Jayalalitha's support, and in Telengana the TRS support.
8. Now, where does that leave the markets? In the short term we would have the Santa Claus Rally if no tapering happens. remember, BJP victory is just a excuse, the rally is based on liquidity flows from abroad. The FIIs have already purchased 3500 crores worth of shares in the first week of December to go with the November net purchase 6500 crores.
9. The December rally also takes place as Fund Managers usually dress up their portfolios to get end of year bonuses. In the month of Jan-March, the markets usually top out and if they do not in May usually a big crash.
10. In the short term, watch how market behaves around 6357, if that is taken out then in a euphoria rush 6500-7000 on the cards.
11. The NTPC bonds were sold out in a day. The Hudco bonds and IIFCL bonds are still open. Invest for safe tax free returns.
1. First things first. Whatever be the minor change in positions after now, the message is clear, the voters want the Congress out. The party has been almost wiped out in Delhi, in Rajasthan and Madhya Pradesh they have won very few seats. If the BJP can secure almost 2-3rd majority after 10 years in power in MP, it means Congress may eventually get wiped out from the Hindi heartland. Remember, no party can afford to remain out of power for almost 15 years in a State, the cadres start deserting the party.
2. In Delhi, the Congress will finish a poor third. This sends out a very strong message. The voters are fed up with the Congress. They will prefer anyone else but the Congress. Even the unkown Aam Aadmi Party will do. The results put the AAP in the best position of the 3 parties in Delhi. They can continue with their shrill rhetoric till the General Elections. As the Oppositio party, they can ask questions. If they had won, they would have to give answers soon.
3. Rajasthan has been a whitewash for the Congress. Losing a elections after 5 years in power is fine but this is a whitewash but with the opposition winning almost 75 % of the seats is a bit too much. The Congress may get decimated in Rajasthan.
4. The only silver lining for the Congress is the Chattisgarh elections. Here also, they had the advantage of 10 years of anti-incumbency factor, the sympathy factor for the massacre of their leaders and yet they are neck and neck with the BJP. A few seats here and there. No decisive mandate in their favor.
5. What does this indicate for the 2014 elections? A NDA led formation or a Third Front khichdi leading to instability. There may be 1 more general election about 2 years from this one. This reminds of the 1996 scenario where for 2 years we had the Third Front propped up by the Congress and then BJP coming with a mandate in 1998.
6. The ball will now be in Narendra Modi's court. If he can keep up the momentum and continue with the pace of rallies, the BJP may just be in power. Remember Modi needs just around 200 seats, with 200 seats the allies will come. Power is a magnet for the allies, idealogies be damned.
7. Where will the 200 seats come from? UP and Bihar are rich harvest states. Karnataka has Yeddyruppa coming back. Gujarat Maharashtra, Rajasthan, MP, Punjab, Delhi are few more friendly States. In the South, they would need Jayalalitha's support, and in Telengana the TRS support.
8. Now, where does that leave the markets? In the short term we would have the Santa Claus Rally if no tapering happens. remember, BJP victory is just a excuse, the rally is based on liquidity flows from abroad. The FIIs have already purchased 3500 crores worth of shares in the first week of December to go with the November net purchase 6500 crores.
9. The December rally also takes place as Fund Managers usually dress up their portfolios to get end of year bonuses. In the month of Jan-March, the markets usually top out and if they do not in May usually a big crash.
10. In the short term, watch how market behaves around 6357, if that is taken out then in a euphoria rush 6500-7000 on the cards.
11. The NTPC bonds were sold out in a day. The Hudco bonds and IIFCL bonds are still open. Invest for safe tax free returns.
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