Market sentiments and stability in government go hand in hand. As such, if the government is unstable, chances of negative sentiments driving markets down assumes significance and vice versa.
And a party in power at the Centre with a strong majority, as has happened in India after the recent Parliamentary elections concluded, may be the exact reason behind the markets’ rallying to historic highs with expectations that economic reforms will be introduced and implemented much faster.
With speculation rife about the intentions of the new Congress-led UPA government regarding the Budget and its views on the economy, the powers-that-be thought it fit to field its frontman on the financial front, Finance Minister Pranab Mukherjee, to calm the rumours and end any knee-jerk reactions stemming thereof.
The pleasant surprise brought in by the election results led to a euphoric rally in the stocks markets that brought in good gains for the mutual fund investors as well. All equity funds category ended the week in green territory for the week ending May 22, 2009.