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The greatest battle on Planet Earth has officially begun.
The war will be physically fought in the dusty trenches and maidans of India but - what the hopeful candidates will wish for - is to capture your heart.
As an estimated 814 million voters decide to cast their votes (or ignore the tamasha), the Election Commission will oversee 930,000 polling stations over 9 dates of polling spread over 6 weeks.
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Sorry, IPL, the Home Ministry has better things to do than give protection to a fading entertainment event which is prone to match-fixing antics. In fact, it is possible that by hosting the IPL 7 at the same time as The Big Fat Indian Election, the bookies may not devote much time to the cricketeering and racketeering and may focus their resources on the outcome of The Big Fat Indian Election.
Depending on which political party you belong to, you may have your own view of the outcome of the greatest show on earth: The Big Fat Indian Election.
But, for now, the consensus says the BJP will be the single largest party and - with some minimum help from coalition partners - will form the next government.
The Congress will revert to what it was in 1999 and 2004.
The Aam Aadmi Party may get some seats but not beyond 50.
The multiple regional parties (there are 36 other parties in the 15th Lok Sabha) - including the Third Front, which seems doomed to the cycle of death and rebirth for some past sins- will get below 200 seats.
50 days of excitement!
For the next 50 trading days, the S&P BSE 30 Index will gyrate like the heroines of Bollywood with a lot of suggestive moves but, no permanency.
But the best moves, the climax as it were, will be on Monday, May 19th: that will be the first trading day after the announcement of the election results.
Look what happened to the BSE-30 Index in May, 2004 when the then incumbent BJP lost to the upcoming Congress-led UPA 1 (see Graph 1)
And remember the surprisingly better showing of the Congress which resulted in UPA-2? The BSE-30 Index surged by +17.2% in 36 seconds of trading with 3 circuit breakers on May 18, 2009 - the first trading day after the elections were announced!
...and then the reality
But those gyrations were in the honeymoon (or nightmare) periods.
After the tamasha of #TBFIE dies down and the bookies have packed their bags to start taking bets on IPL 7, reality tends to seep in.
The tantalizing Bollywood dancer is now a mother - she begins to be judged differently.
The investors now wish to know the long term economic policies: the focus on inflation, interest rates, fiscal deficits, current account deficits, and an endless list of "policy" choices.
And based on the handling of this - within a changing global environment - the stock markets will boom or fade into irrelevance.
After the shock defeat of the BJP in 2004, the BSE-30 Index collapsed by -20% within one week.
Yet, for the tenure of the Congress-led, UPA 1 government, the BSE-30 Index surged by +207% in Rupee terms. For FII investors, the return was +197% after taking into account a 10% decline in the INR against the USD over that 5-year period from 2004 till 2009.
After the surprise win of the Congress by a better margin in the 2009 elections, the stock markets surged by +17.2% on May 18, 2009. Yet, over the tenure of this government, the BSE-30 Index has gained +40% in Rupee terms. It would have been better for most investors to have put their money in fixed deposits! For the FII, the performance was dismal. The weak INR decimated their return to +6% in USD over this entire 5 year time period.
Invest or speculate?
As a speculator the next 50 trading days will give you the opportunity to make - or lose - a lot of money.
Dance, eat, and celebrate #TBFIE.
As an investor, the long term economic framework within which Indian businesses operate - across election cycles and multiple #TBFIE occurrences - is far more important. Elections and election results are irrelevant to the long term performance of your portfolio.
So, keep the chilled nimbu paani and hot chia ready, the chiwda and thepla close by, and a remote to watch the excitement of the greatest battle ever fought on planet earth: #TBFIE.
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