>ELECTION RESULTS - LOK SABHA (GEPL)

"Uncertainity out"

Post Election Leads/Result - Elect Your Sectors

The country has seen another reversal on the election results front which were forecasted by lot of sephologist who were basically indicating a terribly terribly hung parliament. The results are clearly indicating a mandate for UPA to run the government for next five years and that too without any clutches. This means UPA can accelerate the reform process with a human face with its team comprising of Mr. Manmohan Singh (Hon.. Prime Minister), Mr. Chidambaram (though currently trailling) (Hon.. Home Minister) and Mr. Montek Singh Ahluwalia (Chairman,.Planning Commission), who were the first to promote LPG (Liberalization, Privatization and Globalization). We expect the following sectors to be in limelight and attract faster liberalization steps which were opposed by LEFT, who have incidentally been left out in the race.

INFRASTRUCTURE: The government spending coupled with further stimulus to the economy shall attract more funds to infrastructure development programme.

POWER: The backbone of any economic growth cannot be completed without any government laying emphasis on the power sector. Further industrialization shall need more power and more UMPPs (Ultra Mega Power Plants). The concentration initially would be on Power ancillaries and equipment manufacturers.

INSURANCE: The almost clear majority and no hitches left for LEFT now. The reform in sector shall be put on faster accelerator.

RETAIL: Initially the government will probably go slow in further reforms in the sector,
keeping the social obligation in mind.

DIVESTMENT: The off balance sheet expenses and with almost majority in parliament, the
divestment of most profitable PSU's may take place at appropriate time and price. This
could attract investor latching on to PSU listed stocks.

BANKING: The banking / finance sector reforms would also be now taken up on priority basis. One could see consolidation in this sector particularly within the PSU banks themselves. However, there might be some legacy issues such as resistance from unions, branch overlap and different technological platforms which might make the merger of some PSU banks difficult. In case of private banks we believe RBI will be selective and allow acquisition of weak Indian banks only to begin with. We also expect voting rights of investors holding more than 10% in a banking company to be made proportional to their shareholding.

AGRICULTURE: In the last couple of years of UPA's last tenure, the focus was repeatedly harped on the agriculture reforms. One could expect some tinkering in the subsidies both directly and indirectly associated with the sector. We would like to highlight the fertilizer sector in particular.

EDUCATION: We think by the past experience that educating the Indian population or increasing the literacy rates in India shall become beneficial for any political party as the average age of an Indian citizen is between 25 -35 years. Thus the focus of UPA would also be on Education sector.

Though every thing looks rosy now but we certainly feel the economy has to go through serious consolidation phase both domestically and adjust to the international events that have taken place and their repercussions to Indian economy which is very much visible on export front, which have seen a drop of 33% in last couple of months. We would thus caution investors not to get carried away but be selective and have a systematic investment approach to create wealth.

To see full report: ELECTION RESULTS