SP's likely win energises Ambani stocks, dampens Jaiprakash

The exit polls say it’s time to go long on Samajwadi Party (SP) and short on Bahujan Samaj Party (BSP). This is what the markets are telling us today (Monday, 5 March).

Companies or industry houses that are reckoned to be close to these parties have been trending differently on the bourses.

Take the Anil Ambani group of stocks. Exit polls say the SP will be a clear leader in Uttar Pradesh (UP). The proximity of Anil Ambani to the party is well known. He was a Rajya Sabha MP and elected with the help of party. Today his companies are among the top gainers and the most traded stocks.

Reliance Infra has gained 6.6 percent at Rs 662.35, Reliance Power is up 4 percent at Rs 134.20, Reliance Capital has gained 2.1 percent and trades at Rs 436.20 while Reliance Communications trades 1.70 percent higher at Rs 96.75.

Strength in the stocks can be judged from the fact that the markets are trading 200 points lower (Sensex).The group had been the official choice under SP rule for setting up power plants in the state. The heir apparent of SP, Akhilesh Yadav, has said that one of his focus area will be power sector reforms.

On the other hand, stocks in the Jaiprakash group, which is known to be close to ‘Behenji’ in BSP, are all on the losing side. JP Associates is trading 5.7 percent lower at Rs 70.20, JP Infratech is down 3.8 percent at Rs 44 while JP Power also trades 3.9 percent lower at Rs 41.95. The group has been winning a number of projects under BSP rule, including the Ganga Expressway.

The sugar lobby has never been too happy under BSP rule. Reflecting this sentiment, the stock prices of Bajaj Hindustan gained 2.7 percent at Rs 36.10 while Balrampur Chinni also opened nearly 2 percent higher, but later slipped lower.

The Mayawati government had in November, with an eye on the forthcoming elections, decided to hike the State Advisory Price of cane by Rs 40 per quintal (doubled during Mayawati rule). Though the move did not help her, given the exit poll results, it was effective in bringing down the share prices of sugar companies by nearly 40 percent since the announcement. SP is expected to extend some of the benefits it had extended to the industry in 2004 but were scrapped by Mayawati in 2007.

While there is precious little one can do to prevent the politician-business house nexus, there is one way to capitalise on it. Marketmen are going long on companies which are close to the party which is expected to win and short on those that will lose.