The Hindu Business Line : With the political kite flying high

DO market indices mirror concerns and ecstasies of politicians as faithful agony aunts? Market watchers time and again have tried to read in vain the footprints on Wall Street or Dalal Street. It has been difficult always to find possible genetic traces of political trapeze in the economic arena.

Dow Jones may provide a clue or two in the long run-up to the Presidential elections in November for the discerning observers or the Sensex may drop a few hints for the feel-bad and feel-good brigade.

But the rider is that at the end of the trading period, it may still remain camouflaged.

The biggest challenge is to prove the link.

The politicians, at their convenience, use the key stock market indices to flaunt their economic achievements and tend to drop them like hot potatoes when the indices head south for long (remember Ketangate). Last week's fall in the Sensex was a case in point.

The market observers attempted to relate the weakness in the benchmark to the forthcoming primary market issues - both rights and IPOs. The apprehension of a liquidity mop-up did the rounds initially. The ruling political gentry played it down. Then Thursday's sharp fall was quickly attributed to the new US barriers for the Indian techies and shrimps. But the Opposition (Parliament though dissolved) did not miss the opportunity to link the market dip to an assault on the confidence over the CAG's negative comments on Centaur Hotel disinvestments and the so-called Goa let-off for the Aviation Minister.

Of political capital and capital politics: The capital market has never been insulated from politics. However, the current trend is more pronounced then ever before. The political establishment now unrealistically looks up to the stock market to endorse its deeds (by implication promises too and ignore misdeeds, if any). To put it bluntly, the stock market is now treated as a constituency, if not a fund-raiser.

If you juxtapose apparently unrelated events such as top corporate honchos, at business parties or cultural functions, hogging limelight with the Ministers and celluloid celebrities, who in turn brush shoulders with Opposition political leaders with close links with the wily stock market players, you tend get a feel of the circle.

For an investor, the issues at stake are the future of the longest bull run in the domestic market, functioning of the price discovery mechanism and valuation of the Indian equities abroad.

Dalal Street is talking about, in hush-hush tone of course, an alleged large-scale selling by a few corporate investors.

Last week, the domestic mutual funds were also on the selling (or profit taking) mode, while the FIIs picked up stock with greater vigour than in the previous week. The traders frenzy enhanced the intra-day volatility. The retail investors were not left with much option but to swing between passive stance and risk trading.

Gone are the days when someone bought and blissfully forgot the Street for years. But the golden rule in the market is that if you have small money and want to make a daily call, you may end up being slaughtered. The big money bags are also seemed to be suffering from some indecision, whether to put in money now or later in the secondary market.

According to the technical analysts, this week the Sensex is likely to move within a range between 5,770 and 6,083 points. But then there is no guarantee. As the market is in the rarely charted territory there aren't many historical precedents to fall back upon. (The wave theory is not much of a help). If the corporates step up their selling spree (mind it, this is no bear hammering), the Sensex may break the support at 5,770.

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