'Till the time you have the equations right the market will remain concerned.'
'If the (coalition) government is taken care of, then probably (the markets will) come back to its rhythm.'
Deven Choksey of K R Choksey, a well-known stockbroker and investment house, tells Prasanna D Zore/Rediff.com why -- with Prime Minister Narendra D Modi at the helm -- the markets will find back its rhythm once a solid coalition government takes shape at the Centre.
There has been huge volatility in the last two days after the Friday close and thousands of crores of investors' wealth have been washed away.
You only look at one side; yesterday (on June 3 when the benchmark Sensex flared up 3.4 per cent on the back of exit poll results that Narendra Modi and his Bharatiya Janata Party would get 350 plus seats) people made wealth also.
The only concern is the huge volatility one witnessed on June 3 when the Sensex jumped 3.4 per cent cheering the exit poll result and cracked 5.7 per cent on June 4 as actual result did not show an absolute majority for Modi...
(Market) volatility never hurts investors; volatility only hurts (and benefits) the traders. I want to ask a question to the media -- are you writing for investors or traders?
What explains the volatility in the market? Is it political uncertainty?
Modi will come back to power for a third time but will have to depend on allies like Chandrababu Naidu of the TDP and Nitish Kumar of the JD-U, both of whom have proved to be tough allies in the past.
What are the main concerns in the street currently?
Coalition equations are the concern. I think a government with a coalition majority is not a (stable) government because then everybody understands it that they will have to compromise in the way the economy functions.
The market never expected a coalition government. It was expecting an absolute majority for the BJP which would be further strengthened by its allies.
What can long term investors expect from the next government whenever it takes shape at the Centre?
I don't think that any of the economic equations can change because of this result. If any policy change has to take place hereafter it will be a slow process.
We (the next government at the Centre) will have to find out newer ways to run the economy. I don't think one should be unduly questioning this particular thing (the reform process that the next government can undertake).
I agree that an absolute majority (for Modi) would have made a huge difference. But even if there is no absolute majority, life will still move on. Decisions will still be taken. Maybe they will be more calibrated and more introspective before they are taken.
You cannot rule out all these issues.
How stable could the next government be if Modi has to depend on Naidu and Nitish Kumar?
It (the next Modi government) would be as stable as it was between 2014 and 2019 and 2019 and 2024. The 2019-2024 government was sort of a coalition government because they had taken lot of allies with them. It continued to function smoothly even after those in Punjab (the Shiromani Akali Dal) left the government midway. So there was a jolt in between.
Before 2019 also there was a joint coalition government, but still the government managed to take decisions. They took bold economic decisions like implementation of demonetisation, GST, and capping long term capital gain taxes (Even corporate tax was reduced from 30 per cent to 25 per cent via the Finance Act, 2017).
They took all those kind of bold decisions. It's not that they did not take decisions. So even in this (with Chandrababu Naidu and Nitish Kumar) case also, I don't think they will stop from taking (bold economic) decisions.
What would be your advice to investors?
They must continue to invest. This fall in the market is due to the results outcome, but that does not take away the fundamental prospects of the country.
How do you see the markets panning out till the next government takes shape at the Centre?
I think till the time you have the equations right the market will remain concerned. If the (coalition) government is taken care of, then probably (the markets will) come back to its rhythm.
