SAD-NDA split unlikely to trigger wild moves in market; eye on US elections

 The Shiromani Akali Dal pulling out of the NDA due to differences over the Farm Bills will not affect the political balance too much. The BJP has a majority in the Lok Sabha on its own. However, this is the third erstwhile ally, which has pulled out of the NDA after differences with the BJP in the not-too-distant past. The Biju Janata Dal broke away from the BJP before the 2019 assembly elections in Odisha, and of course, the Shiv Sena has also parted ways.

There may be some mild tremors in the stockmarket due to the exit of the SAD. However those are unlikely to amount to major moves. Most of the stockmarket’s concerns about political risks now centre on the US. Indeed, all global markets are now focussed on the upcoming US elections.

The US elections of November 3, 2020 will feature contests of every seat in the 435-seat House of Representatives, 35 of 100 seats in the US Senate, and the Presidency and Vice Presidency. Some 13 state governorships, and many other state and local elections will also be contested.

There could be very substantial changes in the US political environment. The Democrats hold a current majority (235-199) in the HoR and opinion polls indicate they may able to defend that. In addition, the Democrats could take over the Senate. The current Republican majority of 53-47 is potentially in danger, since 23 of the 35 seats up for election are held by Republicans. Most opinion polls also indicate Democrats are favoured to win the White House, with Joe Biden unseating Republican Donald Trump.

The USA, which is the world’s largest economy, is in bad shape. If the Democrats do wrest control of both Congress chambers and the White House, they would be in a position to pass strong legislation. They appear committed to major fiscal stimulus. Markets would certainly like that. Trump’s handing of the pandemic has also been widely criticised with the US logging over 7 million cases, and suffering over 200,000 deaths. Hence, there could be some positive market response on that front as well, if the White House changes hands along with the Senate.

However, there’s five weeks to go and anything could happen. The counting will be slow and controversial with a very large number of mail-in ballots. Trump could contest an unfavourable result, especially if it’s close, with high mail-in ballots. There may be days, or weeks, of uncertainty and chaos.

Through October and November, at least until there’s clarity on the US electoral front, the US dollar is likely to see extra-normal volatility and so will financial markets everywhere. Gold (and silver) price movements also tend to be heavily influenced by the US dollar (a weaker USD usually means higher gold prices). This volatility is already visible and it’s affecting markets everywhere.

India is no exception. Markets here are strongly correlated to US movements and we have seen this in the last ten sessions with downtrends in the US stockmarket triggering downtrends in India, followed by a recovery when there was an US bounce. Gold could however, show divergent trends because of traditional festive season Indian demand. But it’s a moot point how much demand there will be, given the stress in the Indian economy.

New investors could find BPCL's 'privatised' work culture delightful

In 2016, when the NDAgovernment repealed the Bharat Petroleum Corporation (BPCL) 1976 Nationalization Act, life for the once private company came full circle.
Even after its nationalisation, the company continued to remain “foreign” and “privatised” in its work culture, say former and present employees and some industry executives. “BPCL has always been spoken about as a multinational company though it is state-run…this sets our work culture also apart from the others," says a senior BPCL official, who did not wish to be named. From ...

Job crisis for real as unemployment hits 6.1%, highest in 45 years

A day after taking took oath, the National Democratic Alliance (NDA) government released the first periodic labour force survey (PLFS) which showed the unemployment rate at a 45-year-high of 6.1 per cent in 2017-18.
Chief statistician Pravin Srivastava, while releasing the report, said the figures from the past were not “strictly comparable” due to a change in sampling design and frame, but the PLFS report itself has compared figures from the past. The report has also given an explanatory note on the change in sampling design, data collection methods, sample collection, among others.
Business Standard was the first to report in January that the unemployment rate had risen to a 45-year-high, as per the NSSO’s PLFS report of 2017-18. However, the government had termed it as a ‘draft report’ then.
The National Statistical Commission (NSC) – an independent body for monitoring the country’s statistics and its framework – had approved the report in December last year but the government withheld the release of the report. This was one of the reasons which had led to the resignation of PC Mohanan, the acting chairman of the NSC, and another member, JV Meenakshi in January this year.
ALSO READ: Unemployment rate at four-decade high of 6.1% in 2017-18: NSSO survey
“Whenever you launch a new product, it needs to be tested and hence, it takes take,” Srivastava said, while justifying the delay in releasing the report. He said that though the report, approved by the NSC, had compared figures from the past NSSO reports, a need for review was felt. “The report was referred to a standing committee which has given its report last week itself,” he said.

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According to the PLFS report data, the labour force participation rate (LFPR) – the proportion of population either seeking jobs or are employed – fell to below 50 per cent. The LFPR stood at 49.8 per cent in 2017-18, compared to 55.9 per cent in 2011-12.
Significantly, the unemployment rate among youth, those between 15 and 29 years of age, rose sharply in 2017-18. It stood at 27.2 per cent for urban females in 2017-18, compared to 13.1 per cent in 2011-12, 18.7 per cent for urban males (8.1 per cent in 2011-12), 13.6 per cent for rural females (from 4.8 per cent in 2011-12) and 17.4 per cent for rural males (from 5 per cent).
ALSO READ: Unemployment rate at four-decade high: NSSO survey compared past figures
The Ministry of Statistics and Programme Implementation clarified that the criteria for “second stage stratification” was changed to education status from consumption expenditure which was used to do surveys earlier. “There is no question of any comparison as there is a change in the way of measurement. Education has played an important role with level of education rising in the country and it was felt that it should be taken as a criterion for the survey,” Srivastava said.
“The results of the PLFS need to be understood and used in the context with which the survey methodology and sample selection has been designed,” the NSSO report stated.
Srivastava said that the consumption expenditure survey, which is slated to release in June end, will capture some trends of employment and unemployment which may be compared with the past NSSO reports.
Job crisis for real as unemployment hits 6.1%, highest in 45 years