Reacting to the outcome of general elections that were known Saturday, India’s markets breached the upper circuit within a minute of opening trade on Monday and had to be halted for the day when they were reopened two hours later. In country-wide elections, whose results were announced on Saturday, the United Progressive Alliance, led by the Indian National Congress party, was returned to power with a stronger mandate than what they won five years ago. The results mean that the government can rule without having to accomodate the interests of political allies who are ideological opponents, clearing the way for potential reforms and fewer investment restrictions in several sectors.
Sensex, the benchmark index of the Bombay Stock Exchange, rose 2110.79 points, or 17.34%, to close at 14,284.21 when trading was halted, and on the National Stock Exchange, Nifty rose 651.5 points, or 17.74%, to close at 4323.15. The chart shows how some key media stocks performed. Sun TV Network, TV18, Adlabs Films, Deccan Chronicle and Wire and Wireless India were among major gainers.
“It’s clearly a strong and uncluttered positive verdict from the market, of a kind that we haven’t seen in a long time. What we have got is possibly the strongest actionable government. The euphoria that we saw today will subside incrementally, but the trend will remain positive,” said Nikhil Vora, managing director, IDFC-SSKI Securities. “FDI (foreign direct investment) relaxation is more of an issue in sectors such as retail and aviation, and not so much in media. I don’t think news media is going to see any relaxation soon, and in sectors such as DTH, markets have already taken it into account. Today we had just 47 seconds of trading, so it’s pointless to discuss any specifics before a few market sessions,” Vora added.
Smita Jha, associate director with consultant PricewaterhouseCoopers, said the industry will benefit if the new government utilizes the mandate to move swiftly on policymaking. “There are several pending policy decisions in the media sector and the delay in decision making is significantly hurting certain sectors. The delay in deciding on CAS, for instance, is hurting the television industry very badly. Is FDI cap being raised to 74% to bring it at par with telecom? Is the government going to restrict cross media ownership, or not? Uncertaintly and the lack of clarity on policy are holding up investment decisions both by domestic entrepreneurs as well as foreign investors. With the stronger mandate, the new government has an opportunity to move swiftly on all these fronts. Otherwise, we also risk losing the momentum on gaining the confidence of foreign investors,” Jha said.