The Mint Report for 24 November 2010

The Mint Report for 24 November 2010

Nitish Kumar is all set to return for a second term as chief minister of Bihar. As of Wednesday night, his JD(U) led coalition has won about 206 seats out of the 243 in the state assembly. Alliance partner BJP is set to bag 91 of them. The opposition, led by the RJD and LJP, could only get a total of about 25, while the Congress party has been virtually wiped out, with just four seats to its name. Wednesday’s results came at the end of the six-phase assembly election that started back in October. It’s a big blow to Lalu Prasad Yadav, whose party, the RJD ruled Bihar from 1990 to 2005. The BJP meanwhile, has gained the most, roughly doubling the number of seats it holds in the state.

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Not surprisingly, Nitish Kumar is seeing the election as a vindication of his policies. Ever since his coalition came to power in 2005, it has focused on improving law and order in the state known for violent political rivalries. Kumar’s other focus has been development. His government has built roads and electric lines. It has also handed out bicycles and uniforms to school-going girls and reserved seats for women in panchayats.

There are indications of yet another big scandal, this time involving corporate loans. On Wednesday, the CBI announced it had arrested eight officials from financial institutions including banks. Those arrested include employees of LIC Housing Finance, Central Bank of India, Punjab National Bank and Bank of India. The CBI claims the officials took bribes in return for offering corporate loans and other services. It also accuses the company Money Matters of offering the bribes to facilitate the corporate loans.

And news of the arrests has sent stocks of the companies mentioned plummeting on Wednesday. Shares of Money Matters dived 20% on the BSE to 531.20. And LIC Housing Finance stocks lost 18.32% to 1,068.55. Punjab National Bank was less affected, only falling 3.10% by the end of trade to 1264.45.

And overall Indian markets also lost ground on Wednesday, with the Sensex falling to a 10-week low. The index closed 232 points lower at 19,460. And the Nifty lost 69 to end at 5,866.