The much awaited elections '09 in India are concluded, and its results are something to be cherished. Sanjiv Bhavnani shares his views on current politics, stock exchange, Indian rupee and above all, the matters concerning the aam aadmi

Elections 2009 have turned in a major surprise for everyone who is supposed to be an expert on politics.

The 'Jaago India Jaago' campaign targeted at getting voters to exercise their mandate may not have brought them out to vote in huge numbers, but certainly seems to have got them to think before voting!

So, the Congress is in, having bettered their best performance in over two decades. Dr Manmohan Singh is back as India's second Prime Minister after Pt Jawaharlal Nehru in 1961 to do a second consecutive full five-year term as PM of the world's largest Democracy. The Congress is firmly in the saddle of the UPA government and expected to complete its five-year term without hiccups from whimsical coalition partners like the Left, and hence, can go about its growth agenda without much concern of support being withdrawn by its partners. So, this could be an unprecedented five years for the India growth story.

Stock markets today have hailed the unprecedented mandate given by the 'Aam Aadmi', with the Sensex moving up over 17 percent in barely one minute of trading. During these 60 seconds, investors' wealth measured in terms of total market capitalization of all the listed companies grew by about Rs 6,50,000 crore. This is the biggest ever gain in the history of the stock markets, not only in India, but possibly in the entire world, with most A-group stocks registering gains between 20 to 30 percent. As I write this note, Indian ADR's are working the same kind of magic at NYSE.

Not to be outdone, the Indian Rupee rallied 3.2 percent on May 11 to post its biggest single-day gain in more than a decade. It closed at 47.88/90 per dollar, off a high of 47.77 which was its strongest since Dec 26, 2008. It had closed at 49.41/42 on May 15. This was the Rupee's biggest percentage rise since Jan 19, 1998, when the currency rose 3.6 percent after the Central Bank had taken a number of steps, including hikes in the cash reserve ratio, repo rate and bank rate. Consequently, The NSE currency derivatives segment witnessed another milestone today by registering trading volumes of more than one million contracts in USD-INR futures, valued at over $1 billion.

What is interesting to note is that though there was enough buying support in the markets today, due to the limited trading time (owing to circuit breakers), barely 1.5 to two percent of daily volumes could be met, thus, leaving a strong demand for stocks once markets open again. So, in all likelihood, tomorrow may not be very different. I would be surprised to see the Sensex not crossing 15,000 in early trade tomorrow, from its closing of 14,284 today.

So, forget buying shares as of now-you are not likely to get them yet. This momentum could create high (read unhealthy) valuations again in the short term, as sellers will disappear unless the Government forces institutions like LIC to off-load shares. And, I believe it'll need to do that soon, as otherwise traders with short positions (created in anticipation of a hung parliament) would not be able to cover their positions without running into huge losses, which could create payment crises in the Bourses.

My guess is that if trading goes the same way tomorrow and markets gain another 10 to 15 percent with thin trades (over circuit breakers), then the Exchanges and SEBI would first modify the rules for suspension of trading, till real prices emerge at real volumes. If that does not help the bears in covering their shorts, then LIC will emerge as a source of supply (and book considerable profits, as it has been the biggest buyer since October '08).

The Rupee will get stronger and though FII's might complain about unattractive valuations and unjustified prices of Indian stocks, they will have no option but, to buy at the moment, as the Indian Rupee is also gaining fast and could appreciate by as much as 15-20 percent over the coming months.

But, am I saying that will this rise continue unabated? No, that is, not without hiccups. However, barring a total crash of the US dollar or its economy, I do believe that India is not going to test its October lows in a hurry. The biggest concern for global markets shall remain the US economy and its currency, which unfortunately constitutes the Reserves of most Central Banks, including the RBI.

Apart from this, most Indian companies that had decent results to declare have already declared their unaudited results in April, owing to the markets moving up over the past six weeks. What is left now, is the not so good results from others, who will now have to declare their Audited Results by mid-June, unless they have already announced extension of their financial year by a quarter-in the hope of a reversal of fortunes.

Now with a clean PM like Dr Manmohan Singh, I am hoping that we add an Economist like Montek Singh Ahluwalia as the Finance Minister (and not a crooked politician) to carry out whatever actions are required to be taken, to bring this 'Aam Aadmi's money' back to a resurgent India, and use it to develop the infrastructure that it was meant for.

The people of India have voted to power a Congress-led government, shorn of Left allies, with a decisive mandate-Now, there should be no excuses. Let us finally see India find its rightful place...

Amen!

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