In recent memory, there hasn't been another period when the fate of business and investments seemed so completely dependent on government and politics.
It's an old saying that when the stock markets rise so much that the news spills over from the pink papers to the white ones, then bad times are coming. I've certainly observed this to be true for every major stock market crash that I've observed in my lifetime. Now, I wonder of a counterpart of this is also true? When the pink papers start covering as much politics as the white papers, then are bad times coming too? Certainly, no one could be blamed for thinking so.
There used to be this notion, which seemed to be feasible at one point, that it was possible to make one's investment portfolio politics proof. That doesn't sound like such a doable thing any more. There's hardly any investor who doesn't feel that events in politics and government are all that matter in what the fate of their savings and investments will be.
I'm not saying that government and politics should ideally not matter but it's a matter of degree. There's the situation of normal impact of policies on investments, then there's a situation where government and politics become central; and then there's a situation where they become the only thing that matters. While that may not actually be so, but certainly, you could be forgiven for taking it as a given that politics, government and macroeconomic events are all that matter.
Look at the headlines over the last few months. The various deficits, interest rates, government permissions for projects, exchange rates, land acquisition, liquidity, the central bank's leadership--it seems that these and similar issues are all that matter. Even the fund flows from abroad--which are, after all, the real driver of Indian equities--seems to depend more on what America's central bank does than on any inherent merit or demerit of businesses. Is this impression is objectively true? It doesn't matter, nor is there any way of determining that. What matters is the state of mind that we find ourselves in, and its pretty much clear that no matter what, this is the way things are going to be till the general elections are over.