The Telegraph
Since 1st March, 1999
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Triple shock for foreign funds

New Delhi, April 14: The war in Iraq, the spread of the SARS virus, and the fall in domestic technology stocks fearing lower earnings, will have a negative fall-out on foreign funds, analysts and brokers say.

They said markets obsessed by war fears for weeks now looked beyond victory in Iraq but have found little to cheer.

“The sentiment is negative,” said T. P. Raman, managing director of Sundaram Newton, a fund management firm. “The markets were already looking ahead, having factored in the Iraq win earlier.”

The main 30-stock Bombay share index on Friday lost 37 points to close at 2997, below the ‘feel-good’ 3,000 points while, the rupee has firmed against the dollar at Rs 46.75 to make imports cheaper.

The bellwether Infosys Technologies stock, which started the sector’s slide on Thursday when it posted disappointing January-March numbers and forecast slowing earnings growth, the fear is others companies may be much worse off.

However, according to Icra, the silver lining is that the war is coming to an end. “The good thing is, finally one veil of uncertainty is over,” said P. K. Choudhury. He added that global security issues would linger on.

“The focus is now on internal fundamentals rather than external factors influencing fund flows.”

Dealers said the market is now focused on yearly corporate results and is awaiting key data coming out of the country's central bank's half-yearly credit policy. The Reserve Bank of India will be announcing the April-October monetary policy on April 29, 2003. The figures will be scrutinised for clues to how the economy would perform during the next six-month period.

K. K. Sengupta, a leading merchant banker, said if the RBI report was positive on the whole, it along with the recently released favourable International Monetary Fund (IMF) report on the country's economy could spur a fresh bout of buying by foreign funds “at that stage”. IMF in its report had said the nation’s economy has fared well and is poised to grow 5.1 per cent this year and 5.9 per cent in fiscal 2004.

“The announcements might spur the market and there could be some heavy institutional buying in old economy stocks,” said Sengupta. “Funds would be active in equity purchases rather than the debt market.”

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