A Bunch of TV pundits and psephologists achieved what the entire bear cartel could not. Their near-unanimous exit poll verdict — that the NDA coalition was on a slippery turf and might not even gain a simple majority — started a selling spree on Dalal Street that sent the BSE Sensex crashing 213 points. This is the steepest fall since the September 11 attacks in New York, proving once again that mass hysteria is never far from the markets. The fear that political instability could be around the corner wiped out investors’ wealth — the total value of all listed shares — by Rs 54,500 crore in a single day to Rs 12,27,900 crore. The biggest losers were public sector and banking stocks, which had earlier basked in the India Shining gloss and the promise of reform. By the time the day ended, the Sensex had fallen 3.6 per cent and the S&P CNX 3.9 per cent. Interestingly the Congress, which gained the most at NDA’s expense in the exit polls, was quick to reassure the business community that the reform process would not be reversed even if the current government was ousted. ‘‘Let me remind the market that the Congress and the United Front government were better reformers than the BJP,’’ said Jairam Ramesh, secretary of the AICC economics cell. He added that his party had three former finance ministers — Pranab Mukherjee, Manmohan Singh and P Chidambaram —in its ranks. ‘‘There cannot be a more pro-reforms face than this,’’ he told The Indian Express. Meanwhile, sources said that Sebi, the market regulator, had sought data from stock exchanges to make sure that the market was not being manipulated. ‘‘The markets have simply overreacted,’’ said Krishnamurthy Vijayan, CEO JM Mutual Fund. ‘‘But as a fund house, we see this as a good entry point.’’ The freefall once again underlined the growing clout of Foreign Institutional Investors (FIIs) and hedge funds on Dalal Street. They pumped in $7.5 billion in the Indian markets through 2003 and were instrumental in driving up the index from its level of 2940 in April last year to 6,000 by January 2004. They have invested another $4 billion this year but today they led the sell-off. Analysts warned that if this massive investment of $11.5 billion — Rs 50,600 crore — starts aborting, the markets could go into a tailspin. Suddenly, the gung-ho predictions that the markets could test levels of 6,200 or even 7,000 seemed far-fetched. In the short-run, analysts expected it to dip another 100 points. The market’s concerns centre around a fractured mandate with no single party likely to be in a position to form the next government. ‘‘Political instability at the Centre could spike economic reforms. The market had been betting that NDA would win the elections and that the new government would step up economic reforms and divestment after elections,’’ said stock dealer Pawan Dharnidharka. According to Jagmohan Nangalia, a BSE dealer, the country may once again witness prolonged uncertanities on the political front. ‘‘The short coalition governments in the 1996-1999 period were bad for the markets. Many crucial decisions were stuck in this period,’’ he said. ‘‘It may happen again. Hence, the selling.’’ However, other factors are in favour of the market. The economic growth is expected to be around 8 per cent, inflation is down at 4.4 per cent levels, the farm sector has turned around and monsoon is expected to be normal. Mass euphoria is as common in the markets as mass hysteria.
