Mandate may propel Dalal Street on a new trajectory

Dalal Street can rejoice on Monday now that the Lok Sabha Poll verdict is out with a clear mandate for Congress-lead alliance UPA once again proving that “Exit Polls” do not necessarily give clear trends — as is evident from the exit polls of various electronic channels predicting a uniform outcome of a “fractured mandate” with varying degrees.
With a clear mandate for Congress-led alliance and the trounce of Left parties, there is no scope for ‘uncertainty’ factor in the Government formation which otherwise would have caused volatility in share prices when the market opens on the morning of Monday.
Now that the continuity in the governance with a ‘difference’ is set, with a UPA coalition led by Congress to form the Government at the Centre is to be seen as a positive as it can provide the impetus needed to boost sagging growth.  The difference this time is that UPA don’t have to put up with the Left parties, whose nuisance value in the name of ideology is too well known to be emphasised here.
Mutual funds, which are sitting on a large cash pile, may step up buying now onwards with the emergence of strong Congress party and its allies forming the next government at New Delhi.  Nomura Holdings Inc had stated last month that India’s next government would offer better prospects for economic reforms without relying on Communist allies for support.  
As Communist parties — who provided support to the UPA government from outside for a large part of the five-year term till ‘Nuclear’ deal happened — were opposed to economic reforms ideologically, UPA could not pursue reforms in a way they wanted to with vigour and pace. 
Coalition governments, which have been the order of the day for the last ten years, may continue this time as well but with the Congress emerging lot more stronger — than they perhaps expected — the coalition partners will not be able to arm-twist the lead party this time.
Yet for stability sake, alliances for Congress too will remain a key determinant. Once the government is formed without much hue and cry, the focus of the market will shift to expectations from the Union Budget 2009-2010 where the focus on infrastructure development will continue unabated irrespective to combat the economic ills of the country.  
Rating agency Fitch last week held out a view that the government needs to cut fiscal deficit to avoid having its credit rating lowered.
While current economic conditions are prompting many governments to undertake counter-cyclical stimulus measures, the recent deterioration in India’s fiscal position accentuates underlying structural weaknesses in public finances that, if unaddressed, could undermine sovereign creditworthiness, the agency said.