The stock market suffered gut-wrenching losses on Tuesday as the poster boy of Indian business . Chandrababu Naidu was brusquely pulled off his pedestal by the people of Andhra Pradesh.
As the first chief executive of an Indian state, as Naidu liked to be called, put in his papers, a shell-shocked market watched Rs 54,000 crore of shareholder wealth getting wiped out in a day of panic.
The 30-share Bombay Stock Exchange index, the sensex which reflects market movement, shed over 4 per cent of its value, surrendering more than 229 points. This was the biggest fall for nearly four years.
Shaken brokers expressed fears that optimism might wane, trying to get a handle on what the Andhra results might mean for the rest of the country. Whichever coalition takes charge, the market worried about stability.
“Would the coalition be strong enough and have the same resolve as before to tackle reforms'” said Ajit R. Sanghvi of MSS Securities, a broking house, summing up the feeling.
Foreign institutional investors, the architects of the rally of the past year that had more or less bucked the trend of knee-jerk panic every time an exit or opinion poll predicted a hung Parliament, have also now turned big-time sellers. Their net sales on Monday were nearly Rs 600 crore and the news is that the trend would have been the same on Tuesday.
In a contagion effect, the rupee was driven down to a three-and-a-half-month low of around Rs 45.40 a dollar in the foreign exchange market. Knocked cold by the market mayhem, Ramesh Damani, a stockbroker who is rarely lost for words, said: “I am very confused today.”
Information technology companies, an industry that had its most vocal champion in Naidu, preferred to hold their silence. Called CyberNaidu for his forceful promotion of infotech in Andhra, the dethroned chief minister had got several international giants to invest in facilities in Hyderabad.
IBM and Oracle were not willing to comment. Oracle has invested about Rs 100 crore in projects in the state, including its India Development Centre that works on new products along with its offices in the US. Sources in the company said that if Naidu-initiated the e-governance projects are reviewed, the infotech industry and Oracle, as a part of it, could suffer a setback.
Microsoft, which set up shop in the state in 1999, said it was hoping to continue the same relationship with the new government. Rajiv Kaul, the managing director of Microsoft India, said: “We have shared an extremely progressive and healthy business relationship with Chandrababu Naidu and his government and we look forward to continue the same with the new government.”
Although the Congress has won a massive mandate by promising in its campaign to address the plight of farmers, the infotech industry organisation Nasscom does not believe the election results would have any impact on business. “Naidu has done an excellent job of developing Andhra and Hyderabad, in particular, as an attractive IT destination…. We are certain the new government will continue strong promotion of the IT industry,” Kiran Karnik, the Nasscom president, said.
Karnik is likely to be correct, but in the annihilation of Naidu Indian business as a whole has lost what it believed to be a fellow-travelling politician. Naidu has often been held up as a model for chief ministers of other states, not excluding Bengal.
After the shock results, industry reaction appeared to suggest Naidu might have been wrong in his overemphasis on infotech. Amit Mitra, the secretary-general of business lobby Ficci, said: “The message of the Andhra polls is clear. Economic initiatives in the services and IT sector should be taken in agriculture, food processing and rural industries.”