That’s the second in a space of nine months: The drubbing handed out by the voters to Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) seems to have created flutters on the Street. Since the highs of October, the Sensex has lost about 1,800 points or 6.5 per cent. On Monday alone, the first trading day after the Bihar Assembly election results, it plunged 550 points before tracing back about half the losses.
The move has now given birth to all kinds of commentary. Some analysts have said all this selling was good for the long-term and a good buying opportunity. Some others have seen this election result affecting the government’s performance on economic reforms lined up such as goods and services tax (GST), foreign direct investment (FDI) in key sectors and the like. Some have picked up the crystal ball to see what 2019 has in store.
Similar crystal ball gazing had followed the win of Arvind Kejriwal’s Aam Aadmi Party in the Delhi Assembly elections in February, as the Sensex had caught shivers then too. Particularly hit were the discom stocks, as Kejriwal had talked about audit and cuts in power tariff.
All these months later, both the discom stocks have never managed to climb back to the levels seen before that Kejriwal induced fall.
The Sensex has also had a lacklustre run. Though it briefly climbed back from the fall on February 10 to kiss the 30,000 levels on March 4, it has lost nearly 10 per cent since then.
That makes one wonder if investors who exited on that cold February morning were the wiser lot. But, things seem a bit more complicated.
To be fair, things had become more volatile on the global front. There were Greece worries in May and the Chinese slowdown came later.
Discounting all this, even the government, which prides itself in being business-friendly and has made all efforts in the recent months to enhance the ease of business rankings, has been found wanting on certain counts.
For example, the government has severely underestimated the damage caused to the investment climate by discussions and social media quarrels over what people eat, how they dress and what movie they go to or what book they read.
Investors, global and local, are not idiots. Just like Bihar’s voters, they go more by what one does rather than what one says.
Having said all this, what action does the Bihar result deserve in the stock market?
As mentioned earlier, both the extreme advices of buy and sell have been doled out already.
What one should keep in mind is that the intermediaries are like events. Big events bring churn and churn brings them fee.
The analyst, whose view you might have read in the morning or listened to on television, is typically someone employed by the broker, who earns with every buy or sell. In accuracy, he could give our poll Chanakyas a run for their money. He doesn’t care what happens six months later. He probably is confident he can cook up a macro-economic explanation if you go to him wondering why the market took the wrong train.
This event would be nothing but a small blip in a long-term investment.
What you need to ask yourself is would you sell your house in Bengaluru because Modi lost Bihar. Or would you marry a guy who met at the party last week because you are smitten by Lalu’s mirthful comments?
If your answer is no, then don’t do anything in the market because some cows came home in Bihar.
