The stock market witnessed sharp ups and downs during the 10-month reign of H D Deve Gowda.
The 30-scrip Sensex crossed the 4000-mark within three weeks of the formation of the government as the market was very bullish on the finance minister, P Chidambaram.
But in less than six months, the impact of the imposition of the MAT and the election of Sitaram Kesari as the Congress president sent the Sensex crashing to a three-year low of 2745 on December 4, 1996.
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The BSE index did recover after Chidambaram presented a market-friendly budget on February 28, 1997.
But the euphoria did not last long as political uncertainty gripped the nation.However, if the movement of the Sensex is tracked from the day the United Front government was formed to the day it fell, the decline of the stocks barometer on a point-to-point basis was only to the tune of 165.28 points.
The Sensex was 3799.01 on June 3, 1996 (the first day of trading after the Deve Gowda government was formed on June 1, 1996) and it closed at 3633.73 on April 11, 1997, the day the government was voted out of power.
Market analysts say that the Sensex movements during the last ten months are a clear indicator of the political instability at the Centre. Also, the direction of the Sensex movements provided a no-win situation for investors.
Of the 206 trading session on the Bombay Stock exchange upward movements (102 times) and downward movements (104 times ) of the Sensex were more or less evenly balanced.
The weekly movement (Sensex at the close of the settlement and on the opening day of the settlement) of the Sensex during this period also revealed that in the last 44 settlements, the weekly gain was recorded on 22 occasions, while weekly losses were reported on as many occasions.
As an analyst commented, the stock market played the role of a casino during the last 10 months.
The markets jubilation over the induction of Chidambaram as the finance minister was much more marked than how it reacted to the installation of the United Front government.
The Sensex surged 250 points within 10 trading sessions to close above 4000 marks. But on reports of a petroleum price increase, the Sensex lost 413.23 points in these trading sessions to touch 3656.03 on July 3, 1996.
But the market recovered about 100 points thereafter on the expectation of an investors friendly budget. Then came July 22. But the most eagerly awaited union budget dashed all the hopes of investors and the market. In particular, the proposal to allow companies to issue non voting shares and to impose a minimum alternative tax ( the former proposal was later withdrawn and the latter modified in the 1997-98 budget) led to a heavy selling on post budget session.
The market crashed by 134.77 points on post budget trading. The fall continued uninterrupted till August 19, by which time the Sensex had shed 516.36 points from the pre-budget level of 3797.85. The market was somewhat bullish after the P N Bhagawati committee presented the proposals of new take-over code to Sebi. But this was followed by the election of Sitaram Kesari as Congress president and as the Congress support to the United Front government became a matter of speculation, the Sensex nosedived to the three-year low level of 2745.06 on December 4, 1996. Compared with the pre-budget level, the fall in the Sensex was as steep as 1053 points.
For the market, the MAT was a big cause for concern. With reports of a review of the MAT doing the rounds in the second week of December, the Sensex jumped by 141 points on December 11,1996.
The market sentiments remained bullish till the budget was presented. In fact, it began soaring very rapidly after the market perceived the 1997-98 budget as investor-friendly and the Sensex came close to piercing the 4,000-mark.
The abolition of double taxation on dividends, the proposal to allow buy-back of shares by companies, hike in foreign institutional investor investment ceiling in Indian corporates and restructuring of MAT created a kind of euphoria that pushed the Sensex by 470 points within four trading secession after the budget.
But on March 31, the first trading session after the Congress withdrew support to the United Front government on March 30, the Sensex plunged by 302 points, the sharpest fall in many years.
In the following nine days, the Sensex kept fluctuating. And it seems that the Sensex will fluctuate even more in the coming days as the country faces increased political uncertainty.
In the last 44 settlements, weekly gain was recorded on 22 occasions, while weekly losses were reported on as many occasions. As an analyst commented, the stock market played the role of a casino during the last 10 months.