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Stock markets shudder over Budget's fate as govt falls, indices nosedive

Stock indices across the country witnessed a major crash with the fall of the Atal Bihari Vajpayee government at the Centre.

There were rising concerns from all quarters over the fate of Union Budget 1999-2000, continuing political instability and worsening of the economic slowdown.

Share prices went on a wild tizzy, soaring to new heights as the day opened and later hitting rock bottom minutes after the Bharatiya Janata Party-led government lost the confidence vote in the Lok Sabha.

The Bombay Stock Exchange, the premier bourse of the country, continued yesterday's rally in the initial trading session and flared up to 3709.57 points. However, as reports of the confidence motion being defeated reached the market, the index crashed by over 250 points to touch the day's low of 3295.65. The BSE Sensex finally closed at 3326.98 points, down 246 points over yesterday's close.

A similar trend was witnessed at other bourses. The National Stock Exchange's S&P CNX Nifty closed the day at 966.95, down 77.50 over the previous close, after touching an intra-day high of 1069.

The Delhi Stock Exchange benchmark index soared up to 813 points but nosedived later to a low of 730.55. It finally closed at 738.57, down 55.78 points.

According to DSE president Ashok Aggarwal, there was a great concern among investors about the composition of the new government and the fate of the Budget.

''If the Congress forms the new government, incorporating other parties as well, and presents the Budget, retaining its basic structure, the sentiment in the capital market will definitely be revived,'' Aggarwal said.

Market players said they prefer a Congress-led coalition government to a Congress government supported from outside by the other parties.

The investors will also definitely watch the contours of the future government, especially those of the finance ministry under a new minister, Agarwal said adding that Manmohan Singh or P Chidambaram are favourites for the post.

''Investors will be adopting a wait-and-watch policy for the next few days until a clear political picture emerges,'' Aggarwal said.

Vinod Jain, president of the Association of NSE Members of India, however, said the political stability which investors in the capital market are so eagerly waiting for does not seem likely.

''Firstly, any alternative government is likely to have more contradictions than the Vajpayee government. Secondly, there is a possiblity that somebody may approach the Supreme Court on the question of allowing Gomango to vote in the trust motion when he is also holding the post of Orissa chief minister. This can also delay the formation of the new government, which will further make investors nervous.''

''Besides, what is the guarantee that the Bahujan Samaj Party, that has voted against the confidence vote after its leader Mayawati declared that the party will abstain from the voting, will vote for the new arrangement?'' he asked.

However, if the political stability returns, the market could be revived depending upon the composition of the new government and the new Budget, he said.

DSE Executive Director S S Sodhi said the rally in the stock market could be revived if the new government gives a semblance of stability. Besides, if the new government does not alter the Budget dramatically, particularly the sops given to the capital market, investors can be brought back to the market, he said.

The current political uncertainty at the Centre has caused a loss of over Rs 500 billion to the capital market in the country during the past three days.

Uttar Pradesh Stock Exchange Association president H K Garg said that the stock exchange index, during the past three days, had fallen by over 400 points or eight per cent due to the prevailing political instability. Garg said prices of shares of various companies had declined sharply.

All this had happened at a time when the economy of the country was all set to take off, he regretted.

The association has plans to open new exchanges in Noida, Varanasi, Allahabad and Gorakhpur. But the market volatility is causing problems. The Lucknow Stock Exchange was opened recently. The association would also organise a professional training for brokers and dealers in Kanpur soon, if political stability returns to the Centre.

UNI

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