Banking, Capital Markets, Featured Work, From the Vault, India, Politics - Friday, June 1, 2001 11:31 - 0 Comments

The budget, the bull and the BSE: Asiamoney cover story, June 2001

Asiamoney cover story, June 2001 (with Saibal Dasgupta)

 India’s groundbreaking, reformist budget has been followed not by momentum and acclaim, but by a stock market collapse, several conspicuous arrests and the banning of brokerages including CSFB. Helped by access to confidential government documents, Chris Wright with Saibal Dasgupta examine whether the country is caught in a permanent pattern of scandal and upheaval, or instead making brave but painful progress towards market reform.

 On February 28, Indian finance minister Yashwant Sinha faced the Lok Sabha (House of the People), the lower house of India’s parliament, and presented a budget that many observers would later call the best for a decade. It was greeted with delight by astonished analysts across the international banking community, who swiftly put out buy recommendations in notes with names like “sunshine on the horizon”. When Asiamoney asked Goldman Sachs strategist Anand Aithal for his suggestions for the Asian finance minister of the year shortly afterwards, he echoed the sentiments of many when he said of Sinha: “If 30% of what he says in this budget is implemented, he will run away with next year’s award.”

But the euphoria lasted less than 48 hours. Within that time the market had unaccountably crashed, and less than three months later India’s markets are back in a familiar mess. The intervening period has seen a sorry procession of scandal and collapse: the stock markets have dropped by a quarter; the president of the Bombay Stock Exchange (BSE) has resigned and had his brokerages banned from trading; his replacement at the BSE has also been removed along with all other broker directors; several brokerages (including Credit Suisse First Boston (CSFB)) have been banned; and the country’s most celebrated investor, Ketan Parekh, has been arrested and incarcerated for allegedly defrauding a bank. Continue…

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