Mumbai: They are on television talk shows and at press conference, articulating party and government policy. Less publicly, they also field questions from those who manage large funds, potentially influencing investment decisions and market movements.
In the midst of the 15th general election, political party figures and government policymakers are being courted by brokerages to voice their opinions on subjects ranging from possible post-election alliances to the state of the economy and the direction it’s headed in.
Arun Shourie, a leader of the main opposition Bharatiya Janata Party (BJP) and minister of disinvestment in the previous government, recently took part in a conference call organized by Deutsche Bank AG.
The German bank, along with Kotak Institutional Equities of Kotak Mahindra Bank Ltd, with which it competes in the brokerage space, also recently organized a conference call for large clients with Montek Singh Ahluwalia, the deputy chairman of the Planning Commission.
Similarly, Bank of America-Merrill Lynch hosted a chat with the government’s chief economic adviser Arvind Virmani.
“I keep on meeting investors here in India and also abroad,” said Shourie, an articulate speaker. “It’s my way of keeping up with what’s happening. I give them my views and I learn from them too.”
Some broking houses and people, whose views on the economy and politics have been heard by fund managers, couldn’t be contacted individually for this story.
Nilesh Shah, deputy managing director of ICICI Prudential Asset Management Co. Ltd said about the interaction of fund houses with public figures: “They are the captains of the ship and it is absolutely critical to understand their perspective as to how they are going to steer the ship in this tough economic environment.”
ICICI Prudential manages some Rs51,000 crore of investor money and is the third largest mutual fund in the country.
By any yardstick, it’s a tough time to run a government. Asia’s third largest economy is expected to grow at a much slower pace, exports have declined for six consecutive months, industrial production growth dipped to a 14-year low in February and the government is grappling with a widening fiscal deficit.
These concerns are reflected in questions posed by fund managers in these conferences.
Take, for instance, the conference call with Ahluwalia. Fund managers’ questions ranged from balance of payments to the fiscal deficit and infrastructure spending.
“We hope that the global economic situation will become normal rather sooner than later but may well take at least a year from now; so, that is broadly the framework within which we are operating,” Ahluwalia said.
Some studies and analyses done by securities firms highlight the importance of elections to the economy.
“It appears that a government which is perceived to be stable has a positive impact on (economic) activity,” wrote Tushar Poddar and Pranjul Bhandari of Goldman Sachs Group Inc. in a 24 April report. “The two elections in which activity declined were when neither of the two major national parties—the BJP or the Congress—were a part of the ruling coalition,” they wrote after analysing the past seven general elections.
Nomura International (Hong Kong) Ltd took a similar view.
“Much is riding on the election outcome: Persevering with economic reforms is key if India’s economic take-off over 2004-07 is to resume,” a Nomura report, released in early April, said. It listed the key challenge to the new government as introducing “macro policies to revive the economy and instill investor confidence”.
The domestic mutual fund and insurance industry manages nearly Rs14 trillion of assets. Foreign institutional investors, the main drivers of Indian markets, sold some $12.18 billion (Rs61,143 crore now) worth of equities in 2008 after pumping in as much as $17 billion in 2007.
“There is a lot of new money waiting to come in as fundamentally, investors are buying into the India story,” said the chief investment officer of a foreign-partnered broking house, who didnt want to be named as he isn’t authorized to talk to the media. “But they are concerned that a rag-tag coalition government wouldn’t deliver on reforms and are eagerly devouring any slice of information they can get about the next formation.”