Parliament holds sway

The markets experienced another depressing week on the bourses, as investors pulled out from equities. It has been only downhill from the pre-budget highs touched in February. The much awaited results season has been relegated to the back seat, as markets focus on the developments in New Delhi. The second round of the budget session has not opened on pleasant note for the majority party in the National Democratic Alliance (NDA). A little ironical that the 'largest party' in a 'democratic alliance' is refusing to go into vote -- take consensus -- on a particular subject. The fracas over Gujarat incidents has rocked both houses of parliament in the current week leading to a stalemate. With a headstrong stand adopted by the confronting parties all regular activities of the parliament have been stalled.

Among the bills that are pending approval is the Finance bill. It seems, the longer it takes for approval, more the chances of rollbacks from the budget announcement. The Finance Minister must be keen to see the back of Finance Bill 2002. Some other bills pending approval are patents, money laundering, consumer protection and fiscal responsibility and budget management. Delay in moving forward on these and other bills have not gone down well with investors'. Also, the increased political uncertainty has added to the risk perception in the markets.

One should have expected a tough opening week for parliament, as opposition and coalition members were likely to debate the developments in Gujarat. The strong stand against the ruling Government is amongst the few times when it is a constructive development. The Gujarat chief minister has to take, if not anything else, moral responsibility for the carnage in Gujarat. The stalemate in parliament and possibility of vote on the Gujarat issue is likely to put pressure on the ruling party to identify a possible solution. Losing the vote will question the moral right of the existing coalition continuing as the Government. A possible solution could be to appoint a new CM in Gujarat and the opposition take back their call for a vote under section 184.

We had mentioned last week, that barring the Gujarat issue, the market looks poised for moving forward. Trading during the week was entirely dominated by the developments at the centre. Last month we had indicated that should negatives out weigh positives the markets are likely to head towards 3,300 levels. Beyond these levels, support is at 3,150. We reckon markets at lower support levels would be exaggerating the current negatives. The fear of political impasse and its ramifications on stability seem to have been factored. Any indication of the situation reverting to normalcy could bring back all the Sensex points taken away. Also, among the three tech bellwethers' only Satyam is left to declare results. Technology results are likely to be a dampener. However, markets move into a period of old economy result announcements, which could bring back cheer.