By Tensing Rodrigues*
The stock markets indeed seem to care a hang for the political events. So breathe easy. Looking at the election results and the subsequent government formation in MP and Rajasthan one is rather quizzed; both the camps seem to be upset about them. Those who expected them to be a complete rout for BJP driven by anti-incumbency were upset because that did not happen. And those who expected the BJP to retain the thrones were also upset because it did not. But the markets were least bothered – they neither cheered nor booed as if nothing had happened.
So, why do you expect the markets to be unduly upset about the general elections? Not that they will let them pass unnoticed. They may not. They may fire a few crackers to mark the passing after all elections are the biggest things that happen in a democracy. In spite of everything that is wrong with Indian politics I have a great confidence in Indian democracy.
With all its shortcomings it is still alive and kicking. In the last dozen or so elections I have been witness to I have seen Indian electorate live up to its reputation of ruthlessness. Not all the democracies including the best of them across the globe can boast of that achievement. Let me not say more. The markets probably know that. And they let the elections be what they are. On their part they do what they need to do, keep a tab on the BP of the economy. And they remain at arm’s length. I am equally proud of the Indian markets as well. Like the elections they too have cast the mighty into dust and raised the lowly to glory.
The stark truth probably difficult to swallow is that the government that comes to power will have to play to the tune of what the economy demands. Whatever might be the banter before the elections the expectations of the people have changed the arithmetic has changed. The ‘demographic dividend’ has also meant that the priorities have changed. ‘Good life’ is what the majority wants. At the election, the gen-next may swing to caste, creed or colour but that done, whatever the colour, creed or caste of the men in power the people want good life. And the group in power (I hesitate to say party in power) has to do just that. Whatever it’s manifesto its first priority has to be winning the next election. But good life is such a slithery thing that in recent times that aim can be achieved only with great difficulty. So the country is back to the start for the next cycle. And the markets play to that rhythm. So do not worry just play your game.
But there are other happenings or non-happenings that can shake the markets. The Mexico wall for instance or Brexit. Not that these matter to us. But it is the sentiment that moves the markets. Is it because something will go wrong? No. Is it because something may go wrong? Not exactly. It is just like getting up on the wrong side of the bed. But there are some real issues that are indeed weighing on the markets. I would group them in two. One there is an overall slowdown. Two the current pace of socio-economic change is more than we can handle.
Globally, at any time, there have always been economies that raced ahead and economies that were in the dumps. Those that grew super normally generated enough wealth for themselves and more so that the crumbs that fell from their tables fed some of the hungry elsewhere. But at the moment one cannot see any richly laden tables around. The internal reports emanating from Europe are sad. The US’s march to bankruptcy, both financial and intellectual, is in the open. And we know almost for certain now that China is on the wane (ask any mine owner in Goa). That is what dampens the mood. Perhaps, it is for the first time since the WW I that we are getting such a feeling. And that comes on top of an overall collapse of what we thought was normal. Our models for assessment of value in stocks are in need of re-calibration. The economies of size have acquired new meaning; the gravity has moved up the value chain. It will take us some time to find the new normal. Till then we cannot but fumble.
* The author is an investment consultant. Readers can send their comments and queries to firstname.lastname@example.org