2009 General Elections: How important are they?

The memory of May 2004 is very sharply etched in our minds- when the
markets fell by almost 25 percent. We all expect the same to happen to
this time around too.

In 2004, none of us were prepared for it. In 2009, all of us are
prepared for it. Just as we were prepared for the Sensex to go to
10000 points in 2001, and to 25000 points in 2008 (and to 6500 points
in March 2009!).

Bulls and bears have never been known to be very well behaved animals.
So are markets. Unipolar views are very risky.

Let us look at our options rationally – the elections can have three
possible outcomes. A Congress-led coalition coming to power will give
a sigh of relief to the markets and if we are able to sustain this
synchronized global rally in equities till then, we will rally some
more in salutation.

If a BJP-led NDA coalition comes to power, the entire broking
community will be highly enthused and we will rally even more.

It is the Third front that we are most worried about. The initial
reaction will be very sharp, but may be very short. Mayawati is known
to be a good administrator and always in a hurry to get things done.
After 58 years of planned development leaving a lot to be desired, we
may be better off with an impatient person at the helm.

To sum up, the sum total of our fears do not add up to much. So did we
miss out on something good that is just about beginning to build up?
Maybe not. We need to get over our obsession with timing the market
and focus more on prudent asset allocation.

If we are focused on long term wealth creation, Election 2009 will
just be a blip on the charts that came and went.

The larger issue that we should we worried about at this point of time
is whether the “green shoots of recovery” that the global markets are
rejoicing about will grow and not wither away. It is naïve to expect
the global economy to start bouncing, but at least the rate of fall in
economic indicators should subside.

This will restore risk appetite and encourage orderly flow of credit
and maybe risk capital and portfolio flows too. Once that happens,
India will get its natural share.