By Waves Strategy Advisors, For daily research updates visit www.wavesstrategy.com
Wishing you all a very Happy and revolution New Year 2014. A change in outlook of Indian politics in 2014 should be the theme of the year!!!
Aam Aadmi Party (AAP) is a revolution in Indian politics creating a mass movement in country. The aim and mission of anti-corruption - a much needed change is spreading like fire across India.Mr. Arvind Kejriwal by becoming a Delhi CM from a party created just a year back simply reflects drastic change in social mood of people since the pervious election held in 2009.
Linking politics to stock market: In 2009 after the clear majority by Congress the already ruling government in form of UPA led to circuit up close on both Nifty and Sensex. Such extreme euphoric rise was based on the expectation of drastic pickup in growth and economy. But all that came was breakout of scams rather than trend.
We have recently witnessed top notch people from Indian corporate has started believing that a change is much needed for this country so that it can become a 3rd largest economy after few decades which many are claiming. But this shift in social mood has come after a sustained period of correction seen in stock market even though it was in the form of sideways action that ensued since 2008 onwards.
The below chart is of Sensex since 2008 onwards:
The above chart of Sensex since 2008 onwards is showing a very clear sideways correction ongoing. We still believe the movement of 2009 was a part of the correction and not the new trend. We have not marked all the scandals since 2009 onwards but to name a few major ones are the CWG of 2010, 2G scam, IPL scandal, Coalgate scam. I might miss out a few major ones as the list is ongoing. But during the period of unprecedented growth from 2003 to 2008 there were news everywhere about India shining and Indian growth, India domestic consumption,decoupling, etc. Undoubtedly the market dynamics and trend was different then as compared against 2008 onwards.
Sideways action is still a correction as it is the period of decelerated growth. During such times demand reduces, situation becomes challenging, money velocity reduces thereby putting burden on financing the projects. This leads to a period of uncovering of scandals when social mood is extremely negative. During such stressful times people tend to find out logical reasons and select the extremists’ party as they crave for change.
Case in point: is that the change we are seeing in Indian politics and crème de la crème from Indian corporate like V Balakrishnan, Adarsh Shastri by joining AAP is simply reflecting a step ahead in this mass revolution. This has happened only after a sustained period of slow or no growth since 2008 onwards. A 6 years of stock market correction is a mirror of this revolution and with the start of next bull trend scandals / scams will again take a back seat and the focus will shift back towards growth and domestic consumption. Memory of people is always affixed on Currency affairs and not on history as it is short lived & this period of agitation, stress will be a passé post 2014!
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