New Delhi, May 15
Even as the share indices hit new record highs and the rupee strengthened to a 10-month high due to the “Modi” factor, markets are bracing for increased volatility tomorrow — the day of counting for the Lok Sabha elections.

The regulators — the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) —have prepared contingency plans. The RBI which regulates forex markets and SEBI which oversees stock markets have in a consultation with the Finance Ministry and prepared plans in case of sharp volatility tomorrow.

“We assured the board that we are in discussions with the Finance Ministry and SEBI. We have placed prudential contingency plans to infuse liquidity if needed,” RBI Governor Raghuram Rajan said.

SEBI is also keeping a close watch on the stock market developments. “We want to assure investors that we are prepared for any eventuality and if anyone indulges in any irregularity in the market, we are fully prepared for that,” SEBI chairman UK Sinha said.

Sinha said stock exchanges would act accordingly, if anything unusual happens and stress tests were being conducted on a daily basis.

The BSE benchmark Sensex has rallied over 1,500 points in the last five trading sessions and hit record highs again today while the rupee today closed at nearly 10-month high of 59.29 against the US dollar.

While most of the exit polls have showed the Narendra Modi-led BJP as the favourite to win the elections, the markets are now focused on the numbers of seats and victory margins. A comment doing the rounds on Twitter said the total number of BJP seats multiplied by a factor of 100 would be equal to the Sensex closing tomorrow.

The markets have risen quite a bit on hopes of a BJP victory and on the other hand, a different result (different what exit polls predicted) may send shockwaves in the market.

Analysts at Goldman Sachs say that exit polls have a dubious record of predicting the actual number of seats. Goldman Sachs in a report said even a slight change in vote share in the actual results could produce a sharp swing in the number of seats which could catch investors by surprise.

Exit polls had called the 2004 verdict wrong by predicting a NDA victory which led to the market sinking and in 2009, the extent of the UPA victory was not correct which led to circuit breakers being deployed and trading had to halted.

The CLSA in a report said exit polls were not the final word on the election results and with the market having moved up sharply, they reduced the possibility of a large market pop on the upside.

New Delhi, May 15
Headline inflation dropped to 5.2 per cent in April due to a decline in prices of food items, including vegetables, and fuel.

The inflation, measured on Wholesale Price Index (WPI), was 5.7 per cent in March. As per the data released by the government today, the WPI inflation in the overall food segment eased to 8.64 per cent in April, from a high of 9.9 per cent in March.

Onion prices contracted 9.76 per cent in April as against a 1.92 per cent rise in the previous month. There was a drop in the rate of price rise in protein rich items such egg, fish and meat to 9.97 per cent from 11.19 per cent in March.

Ficci said the headline inflation had shown a dip on the back of moderation in prices of food articles, fuel and power.

"However, given the recent increase in diesel prices and uncertain outlook for the monsoon, price movements will have to be critically watched going ahead. For the new government, this would be the sbiggest challenge," said Sidharth Birla, president, Ficci.

Analysts say that the RBI is unlikely to cut rates before the Budget.

Sanjeev Zarbade, vice-president, Private Client Group Research, Kotak Securities, said, "Given the emerging risk from an El Nino event and the increase in the CPI inflation, we believe that the RBI will be cautious and may leave the policy rates intact at least till the first Budget of the new Government is presented."

Assocham says though there is a slight moderation in the headline inflation owing to a fall in the prices of selected primary articles and fuel, the WPI for April remained high. On the other hand, an increase in the prices of manufactured products remained subdued, it said.

New Delhi, May 15
An emotional P Chidambaram today bid adieu to the Finance Ministry, which he had served thrice, with a promise that he would continue to remain active in public life.

Chidambaram, 68, who holds the distinction of presenting nine Unions Budgets - a short of the record 10 delivered by Morarji Desai -- listed out the challenges before the economy in his parting address to the secretaries and senior officials of his ministry.

"Since 1966, I have been working for 16 hours a day and I will continue to work so...You will now see me more in public life than you saw me till now," said Chidambaram, who did not contest the just-concluded Lok Sabha elections.

Exit polls show the BJP-led NDA is set to form the government after votes are counted tomorrow.

An official who worked closely with Chidambaram for years and was present at the farewell meeting organised at the North Block office said: "The FM was as emotional to the extent he could be. It is unbecoming of him to be emotional."

Returning to the Finance Ministry in August 2012 after a stint as Home Minister, Chidambaram did his best to put the economy back on the rails. He narrowed the fiscal and current account deficits, lowered gold imports and held meetings in India and abroad to boost investor confidence.

"It was at a tough time when he held the reins at the ministry. He was hard taskmaster and ensured that deficit red lines were not crossed," another official said.

Draped in his characteristic white shirt and veshti, Chidambaram reached his office at 8.15 am, cleared pending files and met senior officials on his last day as Finance Minister of the UPA-II government. — PTI

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