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The markets are rejoicing the probable outcome of the state elections and looking into the future through them. The BJP is expected to rout the congress in four states and acquire the drivers seat in May 2014. To many, particularly in the market, this will be a game changer for the Indian economy going forward. A more stable regime of a reforms oriented and pro-business government under a vibrant, fearless and decisive leadership is the desperate need of the hour. Unless that falls in place, the future looks bleak. The exit polls have lent that glimmer of hope and the market reacted to it as was expected.

The optimism is understandable but not as desirable as it is being made out to be. Political changes can be good or bad. They are very subjective in nature and dependable on the quality of people that come to power. The electorate may see a viable option in the BJP right now, but remember that the new government will only be taking over the reins of the country on an ‘as is where is basis’. The fundamentals of the economy will be the same as they are with the existing government. Yes, the difference as pointed out earlier will come from a more stable regime of a reforms oriented and pro-business government under a vibrant, fearless and decisive leadership that the BJP is closer to be perceived as, than the UPA.

Political outcomes are easier predicted than materialized at times. A state level outcome can be far different than a national level one. So keeping fingers crossed would make more sense than jumping outright and getting on to the bandwagon of excessive exuberance that the markets are right now showcasing. It is important to focus on the challenges that the economy faces over the next eight to 12 months, especially in the light of the fact that it will be some time before a new government can come in and reverse the ills afflicting the economy. After all, if there were a magic wand, the incumbent government would have waved it by now.

Coming to where the markets are headed today, Europe continued to slide with the tapering fears getting accentuated. The ECB too has signaled that there were no further easing measures on the tap and this was like a double whammy for the markets yesterday. The US markets were no different. The S&P 500 and the Dow Jones Industrial Average ended in the red for the fifth straight session on strong data that made tapering look theoretically more and more real than it ever was.

However, Asian markets seem to be coming to terms with the tapering fears and are looking mixed this morning. Japan, Malaysia, Korea and Taiwan are trading in the green while others are on the losing end. The Japanese government has unveiled a massive ¥5.5 trillion spending package to help get over the pressure on the economy from an upcoming sales tax increase in April. The Nikkei is currently trading a quarter percent up from where it ended the day yesterday. The Taiwan Weighted too is up almost the same rate (0.20%) followed by the Seoul Composite which is managing to keep its head above water. China and Hong Kong are trading with a negative bias with the Shanghai Composite down 0.40% and the Hang Seng trading down 0.31% currently. Malaysian markets are more pressured today. The Jakarta Composite is down 0.70% and Singapore too is following the same trend. The Straits Times has given in 0.36% until now.

Yesterday, the Indian markets had shrugged off global cues to shoot up on the exit poll results for the four state assemblies. Continuing from where they ended yesterday, the markets are likely to open on a flattish note and trade with a slightly positive bias today too. However, investors may take some profit off the table and wait to start off a new week with fresh positions come Monday.

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