Markets may get edgy as General Elections get closer

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 Markets may get edgy as General Elections get closer
The next few months are likely to be tricky for the markets, as political decibel levels rise, new political formations emerge and a series of opinion polls start getting analysed.

India is barely six months away from general elections and those investors investing from now until the next elections, will be basing their investment on the grounds that the NDA would return to power or the UPA would get a third term.

Of course, one is hoping that India is six months away and Manmohan Singh does not listen to his former Advisor Sanjaya Baru, who had this to say after Rahul Gandhi termed the recent Ordinance on convicted member of Parliaments as nonsense.

Sanjaya Baru, Singh's former media advisor: "Enough is enough! How long will he (Singh) take this nonsense? PM should cancel all engagements after his meeting with (Barack) Obama, cancel his US trip, return home, call for snap polls, and quit. Service of the country is more important than of any party or family."

The thought of elections a few months in advance are unlikely to go down well with the markets. Economic conditions at the moment are not particularly ideal for snap polls. With growth rates expected to be near decade low, rupee falling to historic lows this month and inflation remaining at elevated levels, the thought of snap polls maybe a little disturbing for the markets.

More so, because all of the opinion poll predictions for the 2014 general elections predict a fractured mandate and that thought is extremely frightening given our fragile economic conditions.

The next few months might see economic data taking a backseat and markets analysing opinion poll data. Of course, any indication that the UPA or NDA coming to power would go down extremely well with the markets.

Any indication of a third front or another formation forming a government would not go down well with the markets. Also, any formation with a substantial say from parties like the Communist and TMC, makes markets nervous, because they are perceived as more socialist and less reformist.

It's perhaps an extremely difficult time for an investor to take a bet. On the one hand we have economic data that is not uplifting in any manner and on the other we have political uncertainty that is looming. The only silver lining is of course is that global economic growth has started rebounding.

Read more about: manmohan singh, rahul gandhi, nda, upa
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