Bourses await budget for lead

By Oommen A Ninan

MUMBAI, FEB. 25. Stock markets are awaiting this year's Union Budget without much excitement. While the market participants do agree that the Government is committed to reforms, they doubt the political will of the Government to implement many of the reform processes. Eventhough the undertone is bullish, any further movement of bourses depends on the impending Union Budget.

``The big fall in share prices in the last one week may actually prove positive for the medium term trend as such falls typically tend to happen after the Budget and not before,'' said Mr. Shyam Bhat, Fund Manager, Tata Mutual Fund. This time around the people seem to have gone by the empirical history of the Indian stock market having a rally before the Union Budget and then falling for a longer period thereafter.

This year this proactive stance of investors to sell off before the Budget would actually mean that they don't expect too much from the Budget and therefore there is no room left for disappointment in the Budget. ``The markets are therefore likely to remain stable in post Budget and even if the Budget gives slightly more positive measures one could see a good rally to probable around 4750 to 4800 levels,'' said Mr. Bhat, adding, ``it is likely that the market may bottom out on Monday or Tuesday between 4050 and 4100 levels.''

The Bombay Stock Exchange (BSE) 30-Share Sensitive Index (Sensex) fell by 208.16 points at 4122.16 compared to 4330.32 recorded in the previous week

Compared to this calendar year's highest weekly close of 4397.33 recorded on February 9, the Sensex fell by 275.17 points. Several times in the year 2001 the Sensex struggled to cross the 4400- mark. On the National Stock Exchange (NSE) the S&P CNX Nifty Index fell by 60.55 points at 1320.45 compared to the previous Friday's close of 1381.

``Markets fell very sharply on back of continued uncertainty about future of Nasdaq with reference to technology stocks. Late in the afternoon on Friday we heard liquidity problems facing some leading operators and there was a fear that there may be some payment problems on the exchange while there is no concrete news, the market was jittery and operators sold off positions in a hurry. Going ahead we do see some bounce back and I hope the Budget will not be a disappointment. The privatisation of Balco is also a test case about the Government's ability to continue with reform process and this is very key to hold up the market sentiments,'' said Mr. Ashwini Agarwal, Executive Director, Kotak Securities.

Though Friday's fall has been attributed by some to a disappointing Economic Survey ``I feel that the Economic Survey was actually as per expectations,'' Mr. Bhat opined. According to him, Foreign Institutional Investors (FIIs) have been consistently big buyers for almost the entire two months of January and February. One has not really heard of any big selling from FIIs even on Friday, when the market fell by 140 points or 3.3 per cent to 4122. So Friday's fall mainly attributed to operator offloading and probably by panic selling by some domestic funds.

Last Friday's fall was led by the technology stocks. The Nasdaq has been consistently on the downtrend and it appears to be quite close to bottoming out. In fact on Friday itself after being down by approximately 100 points it bounced back to end the day in the positive territory up by 17 points over Thursday's close. This should also help salvage the sentiment for Indian technology stocks that has been badly bruised over the last few weeks.

In the Budget the Mutual Fund industry is hoping for reduction in dividend tax on funds with equity holding less than 50 per cent. Said Mr. Bhat, ``More importantly, there is an expectation for opening up of the Pension Funds segment to mutual fund industry.'' This could open a big market similar to the U.S., where pension funds are among the biggest funds``Another expectation is that the maximum FII limit in any company's equity holding may be increased from 40 per cent to 49 per cent,'' Mr. Bhat added.

In terms of industry, the power sector is likely to see an announcement of reforms, such as removal of the cap of 16 per cent returns of power generation companies. The budget may also announce some reforms in the power transmission and distribution segment. In the pharmaceuticals sector, the number of drugs under DPCO may be reduced. In automobiles the excise duty on commercial vehicles or utility vehicles may be reduced.A recent trend being seen in the equity market is the mopping up of shares of undervalued companies by high networth individuals making announcements of open offer and subsequently selling the stake to the promoter at a higher price than the acquisition price.

A case in point is Gesco Corporation and more recently VST Industries. ``It is likely that the Government will allow BAT - a major shareholder in VST industries - to make a counter offer or else allow ITC (whose main promoter is also BAT) to make a counter offer. In the event, high networth individuals who have mopped up the shares may sell out to BAT or ITC at a price well above their acquisition,'' Mr. Bhat felt.

The Economic Survey has suggested several remedial measures for propelling India on a high growth path. The survey calls for a reduction in small savings and Provident Fund rates. It has also asked for effective downsizing of the Government to reduce the combined fiscal deficit of Centre and States from the current 10 per cent of the GDP. ``Though the Economic Survey calls for wide ranging reforms in the current budget, the actual implementation of these suggestions in the budget is doubtful,'' said Mr. Sunil Shah, a leading broker on BSE. According to him a boost to the infrastructure sector looks definite in this Budget. However, a reduction of interest rates on small savings and provident funds and downsizing of the Government expenditure are politically sensitive issues.

All the issues will have to be handled carefully by the Government for successful implementation especially considering that some States are going for elections this year.

BSE to shift 34 B1 scrips to specified group

The Bombay Stock Exchange will shift 34 scrips in B1 group including VSNL and HCL Technologies, to the specified group A from March 26.

The index sub-committee of the exchange at its meeting held on Saturday decided to shift the scrips to the specified category, BSE said in a release here.

Some of the scrips to be shifted to the specified category include Hughes Software, Mastek and Shyam Telecom, it said. All the scrips would also be eligible for BOLT based lending facilities, it added.

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