New Delhi, Oct. 12: India Inc is betting that the recent bull run on the stock markets will continue for at least the next six months.
A snap poll of CEOs by the Confederation of Indian Industry (CII) says that 62 per cent of the respondents reckon that the stock surge will hold for the next six months, 13 per cent felt it would last for three months and only 6 per cent felt that it would sputter out within a month. Nineteen per cent of the respondents refused to predict when the bubble would burst.
Stocks have soared to stratospheric levels ratcheting up the Sensex — the 30-scrip bellwether indicator of the market’s mood — to a 39-month high of 4768.90 points at the close of trading on Friday. This is a level that hasn’t been seen since July 17, 2000.
India Inc, which has been clawing its way out of a two-year morass sparked by a slump in demand, has been looking for measures to prop up the capital market and trigger a surge in secondary markets as well.
The biggest damper for the market has been the recent Supreme Court verdict stalling the Centre’s plan to divest its stake in Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd.
The snap poll showed that 47 per cent of the CEOs felt that the setback to the divestment process would have a moderate impact on the government’s privatisation initiatives. Forty-one per cent of the respondents said the setback would significantly derail the government’s selloff programme, while 13 per cent reckoned it would have no impact at all.
Industry isn’t spooked by the recent rise in inflation and a majority — 84 per cent — expect it to remain within the 4-5 per cent band in the next quarter. On Friday, the government said inflation measured on the basis of the wholesale price index had risen to 5.03 per cent for the fortnight ended September 27 — the highest level since June — buoyed by the increase in the costs of petrol, diesel and food articles.
Thirteen per cent of the respondents said inflation would fall below 4 per cent and only 3 per cent said it would top 5 per cent. Industry also expected the central bank — which is due to announce the busy season credit policy on November 3 — to re-ignite the recovery process through another round of interest rate cuts.
Forty-seven per cent of the respondents felt that the new RBI governor, Y. V. Reddy, should advocate a cut in the bank rate; 30 per cent felt that there was a need to cut the repo rate and another 39 per cent stated that the RBI should cut the cash reserve ratio — a device that the central bank uses to siphon out the excess liquidity within the banking system.
The hardening of the rupee against the dollar over the past few months has sent calculations in industry awry with software exporters yelping the loudest about how it is paring their margins and could hurt bottomlines this fiscal if the trend continues.