A few years ago, I was invigilating in the Delhi University semester exams, and my co-invigilator was from the Department of Economics. She was a stock market enthusiast, not just because she was from economics and therefore might understand Indian economy better than laypeople like us, but also because her husband was a mutual fund manager. He was in a mutual fund company which was set up in India with Japanese collaboration. Its mid cap fund (titled a growth fund) gave phenomenal returns over last few decades. Why were the Japanese running a mutual fund in India? I asked. Was it that lucrative here? In answering that, she pointed out that India was a ‘growth’ market, India was an emerging, growing economy, whereas the Japanese stock market was not. For many years it has remained flat, because this developed country had a stock market that might have long been saturated. India gives good returns. In a teacher’s parlance, while a 10 on 10 offers no scope for any further improvement, 5 out of 10 offers a one hundred percent scope.
There is another striking principle, that of volatility, that holds true may be about any stock market, but it holds truest about the Indian stock market in particular. It dances, in a metaphorical way.
So, while the Home Minister Amit Shah said in an interview, sometime back during the election time, that investors should place their bets before 4th June because the market will rise up and up after that date, when BJP will be back to power with a thumping majority, ab ki baar chaarso paar, that was one such prediction of a dance. It so happened that some people took that prediction to their heart, and the Indian market rose to an all time high, Sensex hitting the 76000 mark for the first time in history on 3rd June.
But then BJP could not even touch 272, and the crash came on the day of election results. 5th June, the market did a correction at a level which happened last only at the time of the pandemic. There was a cumulative loss of 38 Lakh Crore on a single day in the intraday trade. I am not a trader, and I invest only in ETF and mutual funds, but I myself lost approximately ₹ 1L on that day.
However, the market bounced back on 5th, and as I am writing this piece on 6th June, and the clock is close to 2pm, Sensex is at 74817.
It is fast recovering.
So, where does it go from here? What accounts for its dance, its crash followed by such a quick and astonishing recovery? While volatility is perfectly expected in such a scenario of political coalition, what makes the market regain its hope so quickly, instead of a slow-bleeding which was more expected by some financial commentators after the huge crash of 4th June?
I am no financial pundit, but I have a hunch, and this has to do with my interest in politics. And history. That’s why I am writing this article.
Back in the 1990s, Indian economy was liberalizing. History of this period credits the then PM, Narsimha Rao and the then FM, Dr Manmohan Singh as the harbingers and architects of a resurgent Indian economy. We finally came out of the stagnation of the so called “Hindu rate of growth” of the preceding decades.
History of the 1990s often overlooks another figure, because he was a regional player and also because his success was short-lived. N Chandrababu Naidu, the son-in-law of legendary actor N T Rama Rao who founded Telugu Desham Party. Naidu rose to prominence towards the end of the last decade of the previous century.
As Chief Minister of Andhra Pradesh, he welcomed the US President Bill Clinton to Hyderabad, which he styled as Cyberabad. He called himself the CEO of the Telugu Transnational Corporation. It was a new kind of political model, which emphasized on neoliberal economy, foreign direct investment (FDI), and the role of the political class as a facilitator of a booming economy. We may and we should debate about the dangerous loopholes of such a neoliberal model, but no one can deny that such leadership makes the market happy.
Apparently, the population was not happy. May be N Chandrababu Naidu was slightly advanced for his era. Politics was still not fit to be run as a business, or at least not so candidly.
But this man is back now under the limelight. Having won 16 seats in the current Lok Sabha election, Naidu is now the crucial pillar on which the Modi government will rest, and Naidu has been reported to have claimed, among other portfolios, the Finance ministry for his party. He also wants the post of the speaker for his party, just like he did the last time, when Bala Yogi (one of the youngest speakers in the history of Lok Sabha, later died in a helicopter crash) from his party was made a speaker during the Vajpayee regime.
Whether Naidu gets the finance ministry or not, there are reasons to believe that the market insiders feel assured in his presence. The investors in the Indian stock market are not only the domestic ones. Foreign Institutional Investors (FII) are also present, and these big brothers are keenly watching.
And this might be a reason behind the resurgent dance of the Indian stock market.
We shall keep a close watch on the fast-changing situation. As I conclude this article at 2.27 pm, Nifty 50 is at 22,737 and Sensex is at 74,790.
Exciting times, indeed.
