Stock markets upbeat in New Year

By Oommen A. Ninan

MUMBAI, DEC. 31. Usher in 2001, the beginning of the new millennium, stock markets are bullish and market participants are more pragmatic. The hype witnessed in the beginning of 2000 faded at the end of the year. Further, they believe that the beginning of this year will be a period of transition and the year would witness demand for good quality scrips.

``The first quarter of the new year will be a quarter of transition from exaggerated expectations about new economy stocks to reasonable expectations about good quality, good management software stocks,'' said Mr. Sunil Shah, a leading broker on the Bombay Stock Exchange (BSE). Apart from Nasdaq, the market will be driven by Budget expectations and divestment rumours. The political scene may get heated up due to the elections in Uttar Pradesh.

The first quarter of 2001 will give many opportunities for good investment buying. Major decisions may be expected relating to infrastructure projects and consequently speculation in core sector stocks such as cement and steel will continue.

The year 2000 will be remembered as the year in which the dreams of 1999 regarding technology driven growth in India and reforms growth faded. ``However,'' said Mr. Shah, ``I am very optimistic about the new year, but one has to be selective in purchase of scrips and not buy blindly as people have done in 1999.'' The year 2000 will also be remembered as the year in which the Indian markets truly globalised and started following trends led by Nasdaq sentiments.

``Last year was the year of technology, media and telecommunications (TMT) stocks,'' felt Mr. R. Sreesankar, Chief Investment Officer, DSP Merrill Lynch Investment Managers. Though most of the stocks ended with losses at the end of the year compared to the beginning of the year, during the year all these stocks were at all time high.

``We continue to bullish on the Indian economy and the liquidity also remains easy,'' said the analyst, adding, ``we expect 2001 to be another good year for the market.'' According to him, what is happening is when people focussed more on the TMT stocks, they disregarded the old economy stocks and ``what we see now is a complete reversal of this trend.''

The BSE Sensex climbed to an historic high of 6150 during the year 2000 from its opening level of 5005, dominated by the astronomical rise in prices of shares in the new economy.

The benchmark BSE 30-Share Sensitive Index lost around 20 per cent to close the year 2000 at 3972.12 over the last session of 1999. Compared to the previous week' close of 3905.90, the Sensex gained 66.22 points. On the National Stock Exchange (NSE) the S&P CNX Nifty index closed for the year at 1264.15 compared to the previous Friday's close of 1240, a gain of 24.15 points.

``There has never been a bigger disparity between the year that was and the year that could have been.

Touted as the ``Year of India'', the year ended on a fairly uneventful note,'' said Mr. Girish Nadkarni, Chief Executive Officer, TAIB Securities India Ltd, a leading foreign institutional investor (FII). The markets were characterised by frenzied buying in the initial three months and panic selling in the remaining nine. The year also saw the Indian markets being increasingly reactive to global events. Y2K fears receded and gave way to dotcom mania, fancied ESOPS, sky high valuations and then the eventful buckling of technology stocks.

On the reforms front, while several positive steps were initiated such as the Insurance Bill, dismantling of the telecom monopolies and the enactment of cyber laws, the biggest disappointment was on the divestment agenda and the reining in of the fiscal deficit. The manufacturing sector continued to reel under pressure and spiralling oil prices added to the woes.

The agricultural growth was also disappointing largely on the back of a severe drought. The services sector, primarily software exports helped push the GDP growth, but that has so far been lower than expectations. Said Mr. Nadkarni, ``this brings us to the question of Whither 2001?''``We believe that despite the sharp reversal of sentiment for the technology stocks, these stocks would continue to be the focus of markets the world over and more so, India,'' Mr. Nadkarni believes.

Also as seen in the year 2000, volatility would continue to dog the markets and there would be periodic flights to defensives like the pharmaceuticals, companies with strong cash flows. Investors would continue to look for stocks with strong earnings growth and superior returns on capital employed and technology stocks would continue to fit the bill.

Mr. Nadkarni concluded, ``After all, what would India's story for 2001 be if not technology?''

Send this article to Friends by E-Mail

Section  : Business
Next     : CTVs: volume sales to drive margins of cos