Oil Slip

The political turmoil and the anti-disinvestment stance of the Left led to a bloodbath in the stock markets and sent the sensex crashing by ...

The political turmoil and the anti-disinvestment stance of the Left led to a bloodbath in the stock markets and sent the sensex crashing by 565 points. If that wasn’t enough, now the markets are reeling under the dual impact of high international crude oil prices and the Asian market meltdown. Compared to the BSE which crashed by 11.14 per cent, the Indonesian JSX Index crashed by 7.5 per cent while the South Korean Korea Composite fell by 5.14 per cent. The Taiwan index fell by 5.1 per cent. While in China, DJ China 88 fell by 3.9 per cent, Japan’s Nikkei 225 fell by 3.18 per cent, Singapore’s STI 1700.33 fell by 3.11 per cent and Hong Kong’s Hang Seng fell by 2.74 per cent.

The Asian market meltdown was mainly propelled by high oil prices and the subsequent inflationary pressures on the economies and also the death of the Iraqi Governing Council chief in a suicide attack. Supply fears pushed the international crude oil prices to a record-high $41.67 a barrel in Asia. The impact of soaring oil prices would be all the more for India as it imports around 70 per cent of its crude oil requirements.

Economists and market analysts believe though the Indian stock market crash was mainly propelled by the anti-disinvestment and anti-reform statements of the Left parties, the market had not discounted the Asian market meltdown and the high international oil prices in the midst of the election process. Brokers, however, believe the fall would have been easier to cope with had the Congress pushed a pro-reform view more aggressively.

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Vipin Agarwal, director of Longview Research and Advisory which is a member of the NSE and a consultancy for several FIIs, told The Indian Express: ‘‘The market did not discount the Asian market meltdown and the high international oil prices. In fact, in the middle of the elections and the political developments, these factors took a backseat. Now, the impact is being felt and these factors have coupled with the political turmoil.’’

Managing director of credit rating agency ICRA P.K. Choudhury said though it is difficult to estimate the impact each of these factors — political developments, the oil prices and the Asian meltdown — they have certainly hit the Indian stock markets.

Two senior Delhi-based BSE brokers are of the same view. ‘‘The Asian market meltdown and the oil crisis have just added to the fears that the new government might follow anti-reform and anti-disinvestment policies at the behest of the Left. While the Asian crisis and the high oil prices have adversely impacted the minds of the players in the market and the FIIs, the Indian market might have been able to withstand these factors had the Congress-led alliance projected a more pro-reform and pro-liberalisation view. Had the NDA been re-elected, may be the market might have stood up to these external factors,’’ they said.

Principle Asset Management chief executive Sanjay Bhatnagar said while the political uncertainty and the Left stand has caused adverse reactions, concerns over high oil prices also influenced the FIIs to sell part of their holdings in the Indian market.