FALL OF THE SENSEX & OTHER GLOBAL MARKETS

We have been witnessing the fall of global stock market indices, besides sharp falls in the Sensex.

This can be attributed to GLOBAL FACTORS + LOCAL FACTORS + MASS PSYCHOLOGY (call it “domino effect”).

Global factors……The Dow witnessed sharp falls a few days back…this was due to “bad lending” by sub-prime lenders….causing panic globally. Of course, if they fail, the lenders’ / banks / financial institutions might be in a mess…… So the Dow fell….)

Second factor was markets were overheated.

This led to Dow witnessing falls of around 2% & falls in the Pacific Rim Countries’ markets…fall on 14 March was Nikkei 225 (2.92%), Shanghai Composite, Sensex(3%), Sydney's S&P/ASX 200 (2.1%), Singapore's Straits Times(3.17%), S.Korean Kospi,(2%), Hong Kong's Hang Seng (2.8%)…..

Now let’s turn to the SENSEX.

It had touched a high of 14,500 in January 2007 & was expected to reach 15,000 + within March.

But then it started having mini crashes. It was going down to 12,500 ‘s, bounced back…people were optimistic….

But today it is down again at 12,900…..& the pundits were saying it should have been 16,000 + by this time (they were making this prediction in January)….

???Why this crash....

First of all, we're overly spooked by the GLOBAL FACTORS.....

But mainly.....

The SENSEX is witnessing a general MELTDOWN because of inherent weaknesses…..this had been previously warned by major market analysts…Merill Lynch, S&P, etc.

…….will be exploring LOCAL FACTORS & weaknesses of the Indian market next blog

;-) It’s not that weak…I should say 11,000 is the best “support level”.

Future Political Destabilization in India?

Recent assembly elections were held in Uttarakhand, Punjab & Manipur. The result? The Congress lost power in Uttarakhand & Punjab, but held on to Manipur. Now what does that mean?

Anti-incumbency was not the only cause. The underlying reason was the failure of the state governments on the economic front.

Price hikes of 9% (real value)…not talking of Consumer Price Index or Wholesale Price Index, only. WPI & CPI do not reflect real inflation. This over a sustained period of time caused angst among the voters.

The UPA government came to power in May 2004 highlighting failure of the NDA on the rural front. So obviously, there was great expectation amongst rural voters. But Congress failed miserably managing this front. So, in the Assembly elections rural voters went the BJP way.

In the urban areas, the UPA lost due to rising unemployment & rampant administrative corruption.

So, what does this project?

The coming U.P. elections are going to be a bad for the Congress also.

Remember, Congress has only 145 out of 543 Lok Sabha seats. It is artificially “supported” by the Communists, Samajwadis & most importantly other regional parties.

The Communists would come in a collision course with Congress due to differences in economic policy.
The Samajwadis are already in conflict with Congress after withdrawal of support in U.P.
The major blow would be the non-support of regional parties of South India, especially Tamil Nadu. (where also Congress is becoming unpopular).

The magic figure is 273…halfway of 543.

Communists are “blackmailing” the Congress.
SP has withdrawn power. After U.P., it will definitely never give support.
The key lies with the regional parties. DMK+ has a huge number of seats. If they decide they can get better governance with the BJP in centre, it can withdraw power. Or at least threaten to.

Which means…..UPA can fall short of 273

The key lies with DMK+……if they withdraw, the Left Front do not have the numbers to prop up the government.

The present government falls. Another mid-term elections…..

But this scenario is based on many “if-what” scenarios……it’s difficult to predict a total fall.

But I’m 100% sure, Congress would be in severe pressure for the next 2 years it is in power in India. (till May 2009 Lok Sabha elections, that is)