Can Chidambaram Turn The Market Trend?

A big hope sparked in the minds of investors after P Chidambaram took over as the Finance Minister of the country. Chidambaram is well known for his successful stint as the Finance Minister earlier, thanks to the dream budget he presented in 1998. In the current context, if there is one person who qualifies as the best performer in UPA II, it is him.

If you recollect, when Dr Manmohan Singh was first appointed as the PM in 2004 by the UPA Chairperson Sonia Gandhi, he had kept one portfolio vacant, which was that of the Finance Minister. Nobody made any effort to grab the Finance portfolio, on the understanding that Dr Singh would hold it himself. But as soon as Chidambaram came into the UPA-I fold, Dr Singh appointed him as the Finance Minister. From then onwards, the Indian economy continued to grow. The stock market also saw the Sensex reach an unprecedented peak, with volumes like never before. Revenue collection in the form of direct and indirect taxes was also at a peak.

On 26th November, 2008, Mumbai bore a severe brunt of one  of the most heinous terrorist attacks, which prompted thegovernment to quickly move in and replace the then Home Minister, Shivraj Patil, with P Chidambaram. Chidambaram, in turn, was replaced by Pranab Mukherjee, and everybody knows how miserably he failed to manage the economy, which is now at crossroads.

In this background, the appointment of Chidambaram as the FM now is being widely appreciated by investors at large as well as by industry captains. Until Pranab Mukherjee was the Finance Minister, most of the economic indicators were at levels worse than where they stood in 1991, except for the foreign exchange reserves. Since the past one week, as soon as Chidambaram took over the Finance portfolio, the mindset of investors as well as CEOs of India Inc. seems to have changed all of a sudden. So far, they were cursing the PM and the FM for not taking any bold decisions and pursuing economic reforms. However, over the last one week, they seem to have found a ray of light in the dark tunnel after the various announcements made by Chidambaram in his press conference as well as the directions that he has issued to his office to work relentlessly (including on Saturdays and Sundays) to demonstrate his resolve to prove false the accusation that the government has been in a state of paralysis.

Getting back into the North Block and taking stock of how deep the economy is mired in trouble, the FM has promised a blueprint for fiscal consolidation, a review of the controversial retrospective amendments to tax laws as well as policy changes to boost investor interest in insurance and mutual funds. All of this will collectively lead to an image makeover for India and project it as an investor-friendly country. The big guns of India Inc., including Deepak Parekh, Adi Godrej, Anand Mahindra, V N Dhoot and others, have cheered the FM’s promises, with the stock market showing signs of revival in the past one week.

However, Chidambaram will have to show a lot of political courage to take immediate action and will need the full support of his political bosses, including Sonia Gandhi and Dr Manmohan Singh, to lead from the front. Only this will ensure that the government can take tough decisions.

Over the past one and a half month or so, our cover stories have positively biased towards the market. Through the cover story in this issue, we continue to repose faith in the strong fundamentals of the Indian economy and the markets, which we believe are not very far from turning around despite being pitted against so many odds.

Before I sign out, let me remind our readers that the next issue of Dalal Street Investment Journal will cover a detailed sectoral analysis of the June quarter results. We are probably the only financial magazine that comes out with such a comprehensive analysis of the performance of companies and sectors quarter after quarter. Our effort is towards providing readers with a ready reference guide not only for now, but also for whenever they would like to look at it in future. As an important market player, I hope you find this Collectors’ Issue a very useful one. Once again, many congratulations to Mr Chidambaram. Investors still keep faith in you.