The precipitous fall of the stock market today in response to the Delhi Assembly exit polls projecting an AAP victory is a `knee-jerk reaction’ and it would not reshape the reform agenda of the BJP Government at the Centre, according to D Balasundaram, promoter of Coimbatore Capital Ltd and a former President of the Coimbatore Stock Exchange.

He said the correction in the markets gives long-term investors a chance to pick up fundamentally strong stocks. Factors that would drive the market up from now on would be key economic initiatives such as GST and DTC.

Speaking to BusinessLine here on Monday, he said the market had been riding the Modi wave ahead of the Lok Sabha polls and the Delhi assembly polls would not alter the Centre’s policy road map. There was a fear in the minds of investors that if the AAP came to power, there may be a `rethink on the priorities’ of the BJP Government at the Centre because of the populist measures promised by the AAP.

Pointing out that the Delhi Government largely depended on the Centre for financial assistance as a Union Territory, Balasundaram said irrespective of its public posturing, AAP would not adopt an antagonistic attitude towards the Centre. Both Governments would have to mutually coexist and BJP would be wary of the pitfalls of taking a partisan view towards the AAP Government at Delhi, if it actually forms the Government.

He said BJP had won a series of Assembly elections ahead of the Delhi polls and a defeat at the Delhi assembly polls will not pose a threat to the Centre’s stability as BJP on its own enjoyed majority in the Lok Sabha. A few more States are going for elections in the next few months to elect new governments.

Explaining the reasons for the market crash today morning with the Sensex down by nearly 300 points, the former CSX President dubbed it as `irrational and a knee jerk reaction’. He said the market has been riding the Modi euphoria from before the Lok Sabha polls. However, there was nothing phenomenal about the Q 3 results and there was now a realisation as to `how long hope could drive the markets’. This has put the market on `tenterhooks’.

Balasundaram felt that the aces up the sleeves of the BJP Government at the Centre could be the GST and DTC. While the grounds appear to be clear for the introduction of GST, it is not clear when the Direct Tax Code would be given a push. The Minimum Alternate Tax was another issue the industry was keenly watching. The tinkering of corporate and personal income tax rates was another issue that has aroused investor interest.

Balasundaram said the share broking community was hoping for some rationalisation of Securities Transaction Tax (STT) and what would be done with the long-term capital gains tax. Arguing that STT was `economically not justified’, he said banking transactions were not under the tax ambit and said in many countries STT has been abolished. But with the convenience of collecting STT and the significant size of the tax collected, the Centre may baulk at making a major cut in it, he conceded.

He said the Centre has also been taking significant steps outside the Budget to make doing business easier. He said the Centre has taken steps to amend the Electricity Act 2003 to do away with annual electrical inspection of factories. Instead, the industries could engage professionals to do the inspection and certification. Most of the States have protested against this move but it is mentioned that the amended rules would come into force after notification.

He said the Government is also making filing of pollution control applications online. These were `really good steps forward’ and these had nothing to do with the Budget.

The BSE Sensex was down by more than 300 points and among the major losers were Bharti Airtel, Tata Steel, Gail, L&T, Sesa Sterlite, Cipla, Tata Power and Hero Motocorp. 

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