Tuesday, November 12, 2013

Err….Modi responsible for sensex fall as well?!

A few days back, as the sensex scaled lifetime highs, an audacious bunch of stock market operators – and Modi aficionados I may add – rushed to attribute the phenomenon to Narendra Modi. Little did they care for even the slightest truth. Little did they care that the movement of the sensex followed other developments more closely than anything that Modi said or did. So awestruck were they by Modi’s oratorical flourish that they even staked their international reputations to put out one foolish report after another!

So the question today that they have to answer is this: Since the sensex has fallen by some 1000 odd points since its recent high, and equally, since the Rupee has started to depreciate again, shouldn’t these also be attributed to Modi?! After all, if Modi swung the sensex one way (up), surely he must have had some role to play when it moved the other way as well? Maybe it’s because he’s not been speaking often enough?! Maybe his slip-ups on history are becoming legendary and a little too embarrassing?! Maybe these Mensa cohorts are finally realizing that government formation is vastly different from fake, cooked up, attendance in political rallies?!

Just consider the process of government formation. If Modi has to become PM, the BJP by itself must get 210-220 seats. Now a quick analysis of possibilities for the party shows that it can increase its seats count by (maybe) a few in Gujarat, MP and Chhatisgarh, where it had already done well in 2009, and a little more (again, maybe) in states where it fared poorly like Punjab, Delhi and Rajasthan. But all of these states won’t give it more than 20-25 additional seats (over their present 117). The South and East are outside of bounds for the party. In fact, in the South, it will suffer a loss of at least 10-12 seats in Karnataka. In the East, it could lose a few in Jharkhand. So, if it has to make the 210-220 mark, it must get some 50-55 seats in UP and 25-30 in Bihar. Is that even possible? I seriously doubt the UP number. In fact, I even doubt the Bihar one. In UP, unless the BJP plays a vicious Ayodhya-like card (which I fear it will), inciting aggressive communal polarization in the process, the BJP won’t be able to go beyond 20. If anyone is likely to get stronger in UP, it is Mayawati. In Bihar, where it already has 12 seats, it may at best go up by a few more, maybe even touch 20. If UP/Bihar go this way, there is no way the BJP can hit even 175. How will Modi then become PM? Modi’s supporters will say that this is mere “trend analysis” done by an ignorant (worse, paid!) blogger like me, and that Modi is a phenomenon that will break all trends, but for institutions like Goldman and others, who, if anything, overdepend on data and analysis and underdepend on sentiments, before they arrive at conclusions (or do they?), isn’t it a little too early to put out such funny reports?

Besides, just look at the timing of the sensex movement. It rose when Raghuram Rajan took over, and introduced measures to fix the rupee, not when Modi became the PM nominee of his party. It rose when Chidambaram went for road shows and re-established the India story, not when Modi started trashing it. It rose when the Cabinet Committee on Investments took decisive action on stalled infrastructure projects, clearing as much as Rs 3.5 lac crores of projects, not when Modi put out one fake figure after another. And most importantly, it rose when it became clear that the US monetary stimulas programme would stay on longer than estimated earlier. This last one was the most decisive of all factors. Since close to half of all stock market trading in India is undertaken by FIIs, anything that encourages them to invest/stay in India improves the sentiment on D-street. Anything that encourages them to return to the US on the other hand, like recent data of growth and jobs growth in the US, will weaken the sentiment. It is because of this weak sentiment that the rupee has started falling, inspite of every sign that the CAD will actually end up much better than announced earlier.

Of course, the markets factor in the future. But the future is not a strength right now, it is a weakness. The big fear the markets are already factoring in is the possibility of an unstable government in 2014. Had that fear not been there, the sensex would have been at 25000 or more. It’s for the same fear that the sensex hasn’t performed uniformly across stocks. Mid-caps and Low-caps, which FIIs generally avoid, are still languishing. Yesterday’s ET analysis shows that it is stocks in which FIIs have a big play that have done well (equivalent sensex of 41000); the rest are still down. This weakness may be attributed to Modi (!); the fact that he opened up the field and added to the political uncertainty. The strength on the other hand, is co-related to Chidambaram, Raghuram Rajan and Janet Yellen (new Fed Chief), not to Modi.

But such is the Modi PR machinery, that anything and everything good that happens in India is usurped by Modi! I am actually surprised that Modi stopped at merely congratulating ISRO scientists for Mangalyaan, and did not claim credit for the mission itself! I am also surprised Modi stopped at Sardar Patel, and didn’t usurp Mahatma Gandhi as well! Modi is so used to grabbing other people’s credit that the joke goes that Modi would have taken credit even for launching IPL – except that the other Modi (Lalit) became too well known for the event! In this context, Modi taking credit for the stock market performance is hardly surprising.

The real truth is that hyper-aggressive PR, and professional “chamchas” of Modi are making his campaign look a little too comical. Like I said yesterday, Modi is threatening to dislodge Kapil Sharma of Comedy Nights with Kapil fame, not Manmohan Singh, the learned PM of India. Let the charade go on…..it could all end in a classic Greek tragedy for him!

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