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Congress Wins, Poised for a Big Rally?


The Congress has won handsomely in the elections, with over 260 seats by the coalition – a majority is 273, which they can get with very marginal help.

The BJP wasn’t quite the loser – only losing about 18 seats with the NDA going to 160. The losers really were (thankfully) the Left, which got routed in Kerala and West Bengal, and the “third and fourth fronts”. Most importantly, Behen Maya Wati is not anything of consequence, the SP has substantially reduced clout as the Congress bumped itself up in UP, and Paswan drew a blank. Amma in TN didn’t turn out to be a big deal, and Chiranjeevi in AP got a few seats but the UPA won the assembly. Rajasthan stuck with Gehlot – the Raje factor must have been prime in people’s minds.

The losers in the election were the people who thought they could influence the outcome, by dictating what it will take for them to support the almost-won. Most of them now say “We’ll sit in the opposition” like they have any real choice.

The BJP has drawn itself into a corner; with Advani looking like he’ll quit politics (and about time, darnit) and Modi being a very scary alternative for a future PM.

Markets on the other hand will take this positively. It looks like they will open with a serious gap up on Monday, and the pundits say it will last a while. At least for the few days it will take to realise this was not a useful election to win.

The world crisis is far from over, and our Indian version has barely begun. From a political perspective, the budget will be important – at least to understand tax implications. Plus, of course, who’s the FM, if PC is offered the Home portfolio instead. More importantly though, the room for fiscal jugglery has shrunk considerably. Now, the economy has to recover pretty much on it’s own. The tax situation will soon show to be dire – collections will fall, quite dramatically, over the year. So I doubt there will be tax exemptions – if anything, they are likely to shut down or impair all the zero-export-income-tax schemes.

There isn’t likely to be much inflation, but unless a real urban CPI comes up it’s difficult to say where we are at any given moment – WPI seems to be malleable. There is a small hope for further disinvestment and for freeing up the oil business. But it’s a rare time when Congress has a majority and stays non-commie – other than that one spark of goodness in the liberalization of 1992, which was admittedly done staring down the barrel of a gun. The whole Gandhi family has been commie from the start, and even now, with the huge Loan Waivers and fert subsidy, I see commie-ness thriving. Not only is the recovery going to be tough, but if there’s enough commie attitude, it could take as long as the US (which is in substantially deeper doo-doo).

That requires more articulation. Meanwhile enjoy the markets while they last, and I think I will soon revive the short-only-strategy. Let the 4000 arrive!


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