Financial Daily from THE HINDU group of publications
Friday, Mar 01, 2002
A stampede of sorts in the equity market
`KABHI kabab (barbequed meat), kabhi kheema (minced meat)', screams the board of an eatery in Mahim as you wind your way from the Mumbai airport to the heart of the city which is the capital of India's equity market, and waits with bated breath for the Finance Minister, Mr Yashwant Sinha's Budget. But, as it turned out, the Budget had neither kabab nor kheema to offer to the hapless investors in equity.
On the contrary, at the end of the day, Mr Sinha's Budget did make minced meat out of the markets.
The main dealing room at Motilal Oswal Securities in Mumbai wore a sombre look for a major part of Mr Sinha's Budget; a ripple here when he announced the reduction in petrol and diesel prices and a groan there when he replaced the two per cent surcharge with an enhanced five per cent on income-tax.
Stifling a yawn or two, the sales people advised a few restless investors who were raring for some trade or the other on this all important day to "simply stay away.''
"What the hell do I do today? Buy? Sell?'' screamed an e-mail on the terminal of Mr Satish Nair, an Assistant Vice-President on the retail broking side. "Don't do anything'' was his dampening reply. But not easily put off, the investor was back with another query the moment the SBI scrip, a recent darling of the bourses, touched Rs 260 levels.
"What about SBI? Buy or sell?'' came the next query. "Stay away'' was the firm reply.
Harsh, another member of the team sauntered in to comment on what a dull day this had turned out to be. "You should have been here last year; there was no room to stand here. There are 18 terminals in this room, each having two telephones. The phones just refused to stop ringing.''
The CMD of the firm, Mr Motilal Oswal, sauntered in and out of the room, keeping a keen eye on the terminals flashing the rates as the Sensex gingerly began a quiet journey towards the south.
At one point, there was more interest in the room about what was happening in Ahmedabad following the attack on the train carrying kar sevaks in Godhra the previous day.
Gujarati, which is anyway the dominant language of the bourses, was flying thick and fast in the room and somebody commented that the violence and loss of lives in Ahmedabad did not look good for the markets.
As Mr Sinha proceeded to announce a 50 basis points cut in small savings and a divestment target of Rs 12,000 crore for the next fiscal, with both announcements being less than expected, the mood turned dark and the southward direction of the Sensex got accelerated.
As the excise duty on tea was reduced and customs duty hiked, all attention turned to the Tata Tea scrip, which jumped. Similarly, the announcement on reduced excise on consumer care products got exclamations of: "It'll be good for HLL."
But all of a sudden, as Mr Sinha was winding up his speech, came the bolt from the blue. Did he deliberately reserve his worst blow for the end, one wondered. The hitherto tax-free dividends in the hands of investors would now be taxed and that too not at 10 per cent but at the applicable standard rates of personal or corporate taxation.
There was a collective groan from all the terminals and as though by magic, the room suddenly came alive and silent phones sprang back to life.
In a tizzy, Mr Nair had to take rapid-fire orders from customers and no prizes for guessing that they were all sell calls.
To help him execute the orders without wasting precious seconds, his colleague grabbed the phone and screamed: "What's the price of Karur Vysya Bank? Sell 1,000. And 1,000 Polaris, and 3,000 Tata Chemicals and 500 Reliance Petro.''
Meanwhile, the KVB scrip had rapidly slid from Rs 350 levels to Rs 342 and the order placed at even Rs 340 refused to budge on the screen.
"Make it Rs 330, quick," screamed the investor on the other end of the telephone and finally the shares were dumped at this rate.
The selling was across the board and as those investors waiting to get in at lower levels kept calling, the advice was not to panic but not to buy either. Except for the twin oil majors, HPCL and BPCL, Concor, and after a while - when the price had come down to Rs 72-73 levels - Federal Bank and Corporation Bank.
As Mr Sinha bowed out of the TV screen and the industrialists and analysts took over, there was a breather and congratulations were exchanged with a lucky few who had shorted the futures of some individual scrips that morning or the previous day.
"SBI ka kachra ho gaya (SBI has been turned to rubbish) ... Sinha ke Budget ney SBI ka dabba gul kar diya (Sinha's Budget has demolished SBI),'' roared somebody who had obviously stayed away from the scrip which had all kinds of dream target prices circulating in the market hardly a week ago.
Commenting on the sell-off in the market which saw the Sensex ending 143 points lower, Mr Oswal said: "I would not say it was panic, but the Budget was certainly below expectations and a major dampener was tax on dividend to be paid by the investors, that too at 30-35 per cent by individuals or corporates. The other dampener was that the divestment target for next year is below expectations. But on the positive side, the Finance Minister has been able to rationalise the subsidies on fertilisers and kerosene and LPG."
He believes that the markets will remain buoyant in the times to come. "There is no need for panic; investors should stay invested but make sure they are into quality.''
Mr Nair was more disappointed with the Budget and said that the taxing of dividend in investor hands would lead to an exodus from mutual funds by corporates who had parked their money there for tax-free dividend.
"Last year, there was over-enthusiasm and this time we are close to the end of the spectrum. But I would say that after losing another 50 points of so, the Sensex will start going up,'' was about the only cheerful comment he could make.
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