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How long can Manmohan Singh’s Government last? Where will Sensex go from here?
Any stock market recovery that resembles an outburst of short covering is sign of a bear market. The oil price may go down somewhat but the long-term trend of worldwide stocks is severely down. Right now is a time to distribute the poor performing stocks. The cyclical short term bull rally will eventually give in to the secular bear market.
Following UPA government's win in the Parliament yesterday, the Sensex opened with a huge positive gap of 482 points at 14,586. Unabated buying in financial and capital goods stocks saw the index rally to higher levels as the day progressed.
The Sensex touched a high of 14,980, and finally settled with a gain of 838 points at 14,942. In the process the index has gained a whopping 18.8% (2,366 points) in the last five trading days.
How long can Manmohan Singh’s Government survive?
The answer lies in how far the Congress party will use the central Bureau of Investigation and ‘power of industrial money’ to bend the Indian political system. If Manmohan Singh and Sonia Gandhi can manage their way like they have done until now, the domestic financial institutions in the cards with very selective stocks power a new bull rally.
On the other hand, if Indian democracy and freedom of political rights survive, the current Government will fall within weeks as the people who voted for the trust vote start demanding their ‘promised goodies’. Unless the stick is heavy, carrots will not be enough, says one international political think tank.
The Government is unpopular because of escalating food prices. The stock market is weaker because of inflation and stagnation in growth. The fundamentals have not changed. Single day exuberance may not last for long.
BIZ/FINANCE ARTICLES
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