In a special show hosted by CNBC-TV18, managing editor Udayan Mukherjee was joined by market experts Ridham Desai, Madhu Kela and Ramesh Damani to discuss the impact of the elections. The event was held in association with Mint.
According to Madhu Kela, head of equity investment at Reliance Mutual Fund, there are a lot of expectations from the Union budget.
“The mismatch will be in a manner in which the government will act. I don’t think there is any doubt in anyone’s mind whether they will govern better than what has happened in the last five years, because they have come with a clear thumping majority,” he said
However, Ridham Desai, managing director of Morgan Stanley Securities Pvt. Ltd, did not entirely agree with this view. He does not believe that the markets expect too much from reforms.
“Over the last five years, growth has been driven by capital flows. The events of last Saturday (16 May) has changed the outlook for capital flows. We now think that the country could receive $40-50 billion of inflows in the next 12 months. We have to change our growth outlook. The markets have to respond. Now, if the government executes on reforms, I think they’re another leg up”.
Ramesh Damani, a member of the Bombay Stock Exchange, on the other hand, said: “The market believes that, Left or no Left, reforms will happen in the country.”
When asked what are the expectations here on from the markets, Desai said that “the tail risk has been removed”—the tail risk being the Sensex falling to 6,000 levels.
A lot of things will have to go wrong for the index to go to even 8,000 levels, said Desai, who expects the Sensex to touch 19,500 levels this year if the government announces a market-pleasing budget.
Damani, on the other hand, said, “history suggests that we’re still in a bear market.” He is of the opinion that this kind of an economic crisis cannot be resolved within a year.
Kela disagreed with Damani. “You can also construct a situation that India is still in a bull market and that what we have seen is really a vicious correction of the overall bull market. This will really depend on how aggressively the government really responds to the proposed changes that the world is looking for.”