The Indian capital market seems set for some turbulent times. Every time the Bull run shows signs of a revival, there is negative news that causes prices to dive again; clearly even the expectation that good corporate results for the recent quarter will lift indices will be tempered by recent political developments.

On Friday, rumours about the Prime Minister’s resignation sent prices tumbling. Although the Congress Party issued quick denials, there seems to have been some fire beneath that smoke. The party leadership will do well not to push the mild-mannered Prime Minister too far; a person who is scrupulously honest has little incentive to hang on to a chair when political expediency dictates decisions and he takes all the blame.

If foreign investors and portfolio funds have learnt to show enormous patience in dealing with the slow pace of India’s economic reforms, marked by frequent rollback of key decisions, it owes a lot to the faith they have in the leadership of an economist and a reformer. The world recognises that it is difficult to push reforms with a coalition government in a democratic nation with an obdurate bureaucracy (ask Jim Rogers) and a high level of corruption.

The hypocrisy of political posturing and manoeuvring is also evident to the public. From Left Party leaders who object to foreign investment but holiday in Tuscany or a doctor-Minister who thinks nothing of humiliating an eminent cardiac surgeon and destroying the morale and autonomy of one of India’s best-run institutions or even the machinations of another ally, which goes back on its commitment to minor disinvestment plans after emerging victorious in Tamil Nadu—the media reports it all.

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