The most favored capital in currency in an election season is sympathy and all politicians bank heavily on it. Traditionally, Indian voters have a lot of sympathy capital and it is for the political parties to lure them with an appropriate Initial Public Offering.
According to investment managers based out of Janpath Marg, Congress traditionally has an edge over mopping up the sympathy capital. And its 2014 IPO will be no different. “We expect the people to feel pity for the PM. ‘Poor fellow, Manmohan Singh, he is so powerless. Let us vote for him’ people will say and we are hoping on a sympathy wave for our PM.”
What of the BJP? Unfortunately, they have no Prime Ministerial leader for the people to sympathize with. There is of course Narendra Modi, but he is too strong a leader and investment managers are strategizing on how to invent a trade-off between strength and sympathy.
Some venture capitalists suggest that Modi’s stock will soar the moment he goes to jail on account of Godhra riots. Then the voters will queue up for investing their sympathy capital in Modi. There is the danger that minority investors who don’t like Modi’s political model may choose to disinvest in BJP, but that is an investment risk.
The investment pattern of how people invest their sympathy capital has seen a paradigm shift. Earlier, for example, if Mom died, people voted her son. Today the voters have become more bullish, more risk-savvy and are willing to spread the sympathy capital much wider. Here are two examples of how sympathy capital was invested recently:
In AP, Jagan goes to jail for amassing wealth. But his party sweeps the Assembly By-elections. Reason: People sympathized with him.
In Karnataka, BSY is in and out of jail for amassing wealth. His party tolerates him, because the Lingayats sympathize with him, and they form a large investor base.
In Delhi, a lot of people go to jail but Delhi is a big buy investment and too big a market for a single IPO. However, market reforms like deregulation (Resort Politics), institutional investments (bulk buys), strategic alliances, debentures (power sharing), etc have widened the scope for the political investor class.
According to Standard & Rich rating agency, Congress has been downgraded from Negative to Sub-Negative that is just below junk bond status. The BJP is s yet to make the grade for ANY rating purpose, but still it is expected to give a run for the Congress’ junk bond ranking. However, new money is on regional parties like Jagan’s YSR, Mulayam’s Samajwadi Party, Mayawati’s BSP, Jayalalithaa’s AIADMK, and Nitish Kumar’s JD(U).
Though the Congress and the BJP are rated poor, investment gurus are betting their money on either of the two since they feel the regional players may not be able to come up with their own IPOs. The word on Parliament Street is that these regional parties might resort to investing in the mega UPA or the NDA IPO through the institutional investor route (bulk buying), or through strategic alliances.
Within the NDA, the BJP is willing to offer a convertible debenture (power sharing) to the parties supporting its IPO, while the Congress would prefer to lure them with a suitable Cabinet Portfolio Management. One advantage the Congress has is to leverage its CBI (Central Bureau of Intelligence) Resource though there is another contrasting view that its stock has actually crashed because of too much leveraging and therefore there is value now only in deleveraging the CBI.
Political trade analysts predict a lot of turbulence in the IPOs hitting in 2014 due to institutional investors changing their preferences, left, right and right-of-centre. Astute players like Ajit Singh are expert in gaining from arbitrage, viz. buying into UPA and selling out to NDA.
Speculators expect Narendra Modi to be a blue chip (he is already carrying a chip on his shoulder, viz. Godhra) but that could be overpricing his stock.
The TRS is keen to trade in derivatives. If it can derive a separate State for Telengana, it will subscribe to any IPO.
Sharad Pawar is inclined to hedge his subscription for all the IPOs, and then disinvest his stock in all but one IPO ruling at the moment.
Analysts have warned the investing public from falling into the traps of Psephologists saying too much insider trading will make any prediction impossible.
Small then could be the new Big by becoming a holding company for an agglomerate entity, like UPA, NDA, Third Front, etc. The ordinary shareholder voter though finds himself squeezed between Big IPOs which are rated junk and Small Subsidiaries that are yet to be quoted in the Delhi Political Stock Exchange.
