Friday, May 14, 2004
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By Oommen A. Ninan
MUMBAI, MAY 13. The markets finally heaved a sigh of relief on Wednesday as a week of uncertainty on the political front came to an end with the declaration of the results of the 14th Lok Sabha elections. Though the market lost around 227 points in the morning at the start of the trade, it recovered by 41.12 points at the close, as election results kept pouring in, and the picture became clearer. In a highly volatile trade, which witnessed a huge swing in indices, the resolution of the political uncertainty comes as a moment of calm. The rupee too witnessed wide fluctuations as it slipped to 45.75 a dollar in the morning after opening at 45.50. However, it closed at 45.29 against the previous day's close of 45.39. The markets have been weak for the last several days following the indication, by various exit polls, of a defeat for the National Democratic Alliance (NDA). The markets had convinced themselves of a victory for the NDA, and the possibility of a departure from the script shook them up. The scenario of a hung Parliament had alarm bells ringing all over the bourses, and the negative exit polls led to an initial sell-off. Then news came in of the electoral debacle of the Telugu Desam Party (TDP), a key NDA ally, which was routed by the Congress Party in the Andhra Pradesh assembly elections this week. The TDP's ouster triggered off one of the biggest falls in the last four years (more than 230 points) on May 11. Market participants viewed the fall of the TDP as an indication of what was in store when the Parliamentary election results began to pour in. With the election figures showing a mandate against the NDA, and with the prospect of a Congress-led coalition forming the next Government at the Centre, that cloud of uncertainty has now lifted. The market views that policy stability will continue and hence, though in the initial phase there was some concern, the market soon recovered. The long-term view on Indian equity remains positive because of the high level of economic growth, which will translate into corporate performance in the course of time. The market will now focus on the monsoon and other factors at the global level, like rising oil prices and the international interest rate, said Ved Prakash Chaturvedi, Chief Executive Officer of the Tata Mutual Fund. "From a technical perspective the Sensex is close to completing its corrective phase, which began from the peak of 6249 in January 2004. This suggests that the downside is limited from the current price level," said M. K. Srivatsan, Senior Associate Vice-President, Equity Research, Darashaw & Co. The benchmark Bombay Stock Exchange sensitive index (Sensex) registered an intra-day low of 5131.03 and witnessed an intra-day high of 5487.34. However, it closed at 5399.47 against 5358.35, the previous close. 945 scrips advanced today while 682 declined.
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