The Telegraph
Since 1st March, 1999
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Last Week

As reported by us last week, the stock markets have moved up steadily in the past few trading sessions. This was despite a few hiccups like the postponement of the important CCD meeting to consider the disinvestments of oil PSUs, HPCL and BPCL, and a weak international market. Also, there were no major fundflows from the FIIs. Yet the markets remained strong. We believe that the markets will continue to maintain an upward bias in the weeks ahead and should get stronger by the year-end.” No, that was not me. It was a far astute commentator than me writing in the white section of the leading pink paper last Monday with a headline called ‘At last a bull run.’ I think I will quote some more from that glittering piece of investment prediction.

“As predicted by us last week the government has announced a Rs 14,000 crore package for UTI. Similar reliefs for IDBI and IFCI will be announced this week. That should be a positive trigger for the markets. And despite the fracas over sale of government stake in HPCL and BPCL, the disinvestments in other PSUs will move smoothly.

Another plus for the equity markets is the revival of fundflows into mutual funds. Coupled with reduced selling by UTI, this could cause a major re-rating of equities as stocks are under-owned at present and there is limited supply of high quality stocks from non-institutional players.

Also, the macro-fundamentals for the economy continue to improve and corporate bottomlines are set to get better. This has made Indian equities much cheaper in comparison with other markets. Thus, FII flows can pick up later this year. “These are very persuasive arguments and I have quoted them here to offer readers a view radically different from my own.

Of course, a nitpicker like me will never be able to use such prediction profitably. Sweeping generalisations like “macro-fundamentals continue to improve and corporate bottomlines are set to get better” leave me cold because I do not see manufacturers gaining an inch in pricing power — especially when HLL has to offer 25 per cent free for a horribly overpriced bottle of shampoo. But I have two issues with the above incisive comments. One, after the UTI bailout, the entire financial media pronounced a bull run. The sensex touched 3,227 in a two-hour frenzy and then gave up all the gains. By the weekend, it was down to 3,141, down for the week by 40 points in what seems like the start of a new downtrend. What happened'

Two, it beats me how a Rs 14,000 bailout to save bankrupt FIs is a positive development. Somebody will have to pay for it, right ' Where will the money come from' What if the government had imposed a Rs 14,000 crore UTI tax' We are in a big mess and it is getting worse. The spat over disinvestments has crooks and idiots on one side and an intelligent, efficient minister on the other. This year’s budget will be a disaster. The US situation is getting worse and worse, I expect the Dow to sink below 6,000 in due course.

Nasdaq is a bottomless pit. I wonder what will happen to Infosys, Wipro and Satyam over the next one year. Keep your powder dry.

Movement of Indices

       Sensex       BSE 200       BSE 500       S&P CNX Nifty       S&P CNX 500

One year ago       3202.55       329.24       967.46       1036.10       669.90

One month ago       3009.48       366.02       1097.14       969.10       718.80

One week ago       3181.23       377.70       1126.92       1010.60       737.15

Sept 2       3187.26       378.24       1129.22       1013.50       739.50

Sept 3       3159.77       376.62       1123.98       1001.10       735.65

Sept 4       3173.35       378.27       1128.94       1006.95       738.80

Sept 5       3181.47       378.57       1129.99       1008.60       739.75

Sept 6       3141.11       378.48       1117.56       995.20       730.95

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