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'If Jaswant becomes FM, markets will zoom'

Priya Ganapati in Mumbai

In one of the most intensely speculated Cabinet reshuffles, External Affairs Minister Jaswant Singh and Finance Minister, Yashwant Sinha are likely to exchange portfolios.

Even before the formal announcement can be made, the Indian stock markets, financial analysts and stock markets have given their verdict-in favor of a change.

If Jaswant Singh takes over as the new finance minister of India he will begin with a stock market that has zoomed up 44 points in the hope of a change in the leadership. At close of trading on Monday, the Bombay Stock Exchange Sensex was up 44 points to 3,289.

Though the upward zip in the markets cannot completely be attributed to the possible change in the leadership, there is no discounting that the news has played a significant part.

"The market feels that Jaswant Singh would be a better bet at this point of time than Yashwant Sinha in terms of policies, being investor and businessman friendly and revitalizing the stock exchanges. The market will definitely appreciate the change," says Kalpesh Parekh, senior equity analyst, Sushil Finance Consultants.

Agrees Nilesh Shah, chief investment officer, Templeton Mutual Fund, "The market is reacting to the news of the change by going up nearly 1.37 percent. Sinha's imminent exit has not come as much of a shock to it. What it is now interested in is the policies post the takeover."

While Shah and Parekh have tempered his comments with caution, others are ecstatic are the news.

"The market is joyous. It wants a change. It does not matter so much who is coming as long as the person who is at the helm right now is going out. If Jaswant Singh does become the finance minister you will see a very delirious stock market," says a Mumbai-based stockbroker.

Sinha's tenure as the finance minister has been a long unlucky run. In 2001, despite a spectacular budget the Indian stock markets went on a bear trend, plunging down within a few days of the budget being unequivocally appreciated by the industry and political parties.

The bear trend was exacerbated by a series of financial misdeeds that ripped apart investor confidence and hurt the individual investors the most. Soon after the unnatural post-budget, the then-president of BSE, Anand Rathi was forced to step down and later arrested for profiting from insider information.

Later the entire governing board of the stock exchange was dismissed. Soon afterwards, Ketan Parekh, seen as one of the most powerful stockbrokers in the country was arrested on charges of defrauding the Madhavpura Mercantile Co-operative Bank, Ahmedabad of Rs 1.37 billion.

The scam sunk the Madhavpura bank and lead to a series of measures aimed at tightening the running of co-operative banks through the country.

Barely three months later, a crisis broke out at the Unit Trust of India, the government-backed largest mutual funds entity, when it decided to forego dividend payment, despite having assured investors of fixed returns every year. Heads at UTI rolled and then-chairman, P S Subramanyam and two top management executives of UTI, S K Basu and M M Kapur were arrested.

These series of irregularities depressed the stock markets, which has since then been struggling to bounce back.

"Sinha has had to go through some very difficult times. Though his tenure cannot be entirely characterized as a failure, it has not been a very good one either. Sinha has been plain unlucky," says Sumeet Pillai, senior research analyst, Advani Stockbroking Limited.

But what finally turned the markets against Sinha is perception of a vendetta against many stock brokers and broking houses.

"There is a feeling that many stockbrokers are being victimised. They are being targeted because Sinha feels that they are responsible for bringing down the bull run and in turn ruining what was his dream budget last year," says a senior stockbroker.

Naturally almost everyone connected to the stock exchange is rooting for a change.

"With Sinha around it has been one continuous battle. There's just been one bad news after the other," says the stockbroker.

While the thought of Sinha's departure is reassuring, stockbrokers and analysts are also wary of the new direction and policies that Jaswant Singh will bring in. Singh's lack of experience in matters related to the country's finance does not bother them, but that his views of subjects that are critical to the economy are unknown.

"Singh is an unknown quantity in the finance markets. We do not know whether he stands for liberalisation, what are his views on the fiscal deficit, can he control it or how does he want to shape the economy. He is a big question mark," says a senior stockbroker.

Jaswant Singh's proximity to Prime Minister Vajpayee and his fine tenure as the foreign minister are seen as his biggest assets.

"He comes with a lot of credibility. He has the PM's ears, which is very important. The financial markets are sluggish, the economy is sluggish and in these circumstance being part of the PM's clique would help," says Ramesh Damani, a stockbroker with BSE.

The markets are not holding Singh's lack of experience against him. "The finance minister is not the only person who decides the direction and policies. He has a experienced team working with him. What is important is he is a good leader. And in the past too, we have had finance ministers who have not much experience in finance. Finally, the market appreciates you by the way you perform and what your policies are, rather than by your background," says Parekh.

For now, Singh has the markets rooting for him but how he performs in his tenure will determine whether he can retain the goodwill.

"What we are interested in knowing is Jaswant Singh's stand on the major issues. The real significance of the way the markets are reacting will be known only after Singh makes his views clear. It's not who you are but what you will do that counts," says Templeton's Shah.

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