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Are stock markets cheering Pranab's departure?

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Are stock markets cheering Pranab's departure?
A reformist Finance Minister leaving office would have led to investor sentiments turning sour and stock markets tanking. India's stock indices are up more than 6% in the last two weeks, beating performance of other stock markets across the globe.

In fact, last week most of the global and Asian Indices lost around 2%, while the Indian markets gained marginally. Monday has begun on a dismal note for the Asian markets, while India is up again.

 

Stock markets generally reflect investor sentiments. It's a gauge for broad economic and corporate performance. A rising stock market is a reflection of sentiments have turned buoyant. The new found buoyancy is on rapidly growing expectations of a new Finance Minister ushering a paradigm shift from the mundane policies witnessed under Pranab Mukherjee.

 

Markets are up almost 6% in the last two weeks on renewed hopes from the new Finance Minister. In fact, the markets even discounted the RBI inaction on the repo and CRR rate front.

Equities now have a new spring in their step, as analysts believe that the new Finance Minister would bring new ideas to salvage an economy that is fast heading downhill.

Today is Pranab's last day in office and the Indian markets are up when Asian markets are down. They have bucked the trend of generally moving in tandem with other markets. Markets are rising on the belief that the new Finance Minister will not put a "spoke in the wheel" to attract foreign investments as Pranab had done with his retrospective tax policy. The markets are rising on the hope's that the new Finance Minister would be a reformist, who might come up with refreshing ideas.

In fact, most of the potential candidates including Manmohan Singh, P Chidambaram, Montek Singh Ahluwalia or C Rangarajan are all reformists at heart and the markets tend to like reformists.

Pranab Mukherjee is leaving office when the current account deficit has hit a eight year high; the fiscal deficit is dangerously high; there are threats of a downgrade from rating agencies; the rupee has hit a lifetime high and inflation is at elevated levels.

Pranab Mukherjee was more like a "old war horse" who lacked any new ideas. Most of his budgets had little or no vision, were politically correct and had no reforms whatsoever. Little wonder then markets are cheering his departure.

GoodReturns.in

Read more about: finance minister
Story first published: Monday, June 25, 2012, 13:29 [IST]
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