Date:23/05/2009 URL: http://www.thehindu.com/thehindu/pp/2009/05/23/stories/2009052350110200.htm

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With hopes of continuity

Market sentiments have been up since the election results came out. K.A. MARTIN checks out the scene.

“Hope springs eternal in the human breast.” And, nothing makes it surge as a market-friendly election result.

The reactions to the result were as surprising as the results, as if they were what the doctor ordered.

A day after the results were out, share price indices broke records, though profit-booking took much off the sheen away. The gains were led by realty stocks that appreciated significantly in intra-day trading.

They have not rallied so significantly since, but builders are reading the signs of a recovery in the rainbow that was painted after the news that a stable government, led by the Congress, would take the reins of the country again.

It is clear that the people of India are willing to face the realities of the times. They wanted continuity in the policies followed by the previous government, says Abdul Aziz of Skyline Builders and honorary treasurer of Confederation Real Estate Developers’ Associations of India (Credai).

He says the real estate market has reacted positively to the results. There is no question that their will be a fairly stable government now.

K.K. George of the Centre for Socio-Economic and Environmental Studies though feels that it may be too early to read too much into the election results and link them to the businesses of real property and building infrastructure.

The situation is a positive one. The results came when the industry was expecting the worst. In fact, it could have been a difficult and uncertain future if no party cobbled up a decent majority.

According to Mr. Aziz, the positive aspect of the election results is that there is every strong hopes of continuity. The previous government was alert to the requirements of the difficult times. He, however, feels it may take up to six months for the new government to make an impact on the current scene.

Dr. George says the stock market rally was largely due to the surprise experienced by the market. The fundamentals and the global situation, however, have not changed much between the elections and now. But as things stand now, the new government should be able to deal with the economic situation quite efficiently.

Intervention by the previous government, especially through the Reserve Bank of India, was constant and resolute, says Mr. Aziz.

One of the major reasons why the builders are seeing hopes of a recovery is that interest rates are falling.