Financial Daily from THE HINDU group of publications
Friday, Jan 09, 2004
Industry & Economy - Budget
`Further fillip to buoyant markets'
Mumbai , Jan. 8
FUND managers and stockbrokers expect the Government's surprise pre-election sops to give a further fillip to the already buoyant market.
No one in the market expected an announcement today though there were reports of possible duty cuts on select items before the Budget. The announcement came at the close of the trading hours.
Mr P.V.K. Mohan, Head Equity, IL&FS AMC, says that the reduction in import duty will bring down prices in the near term and is definitely good for the economy as a whole. Anything that results in lower input cost to the processing industry will help reduce inflationary pressures. In the short term, commodity stocks may show a negative trend, as domestic prices will be roughly equal to the import parity price. But this will get corrected over the medium and long term, as lower costs would ensure higher volumes, he said.
Mr Ashim Syal, Chief Investment Officer, ING Vysya, agrees with Mr Mohan's views. This is an indication that the "big picture" in terms of policy decisions is in the right place, he says. Also the surprise element of the announcement has now put everyone on the alert - "anything can happen at any hour", he says. The market outlook is very positive. If corporate results are also as per expectations, this will give a real fillip to the stock market, he said.
Stockbrokers are predicting a big day for market tomorrow. Power and pharma stocks will be the scrips to watch out for, says Mr Mitesh Gandhi, a BSE stockbroker. Automobile sector will also see great jumps, he said. The quarter results of Infosys, to be announced pre-opening tomorrow, will decide where the markets will close, he says.
Mr Rajesh Patel, another broker expects the Sensex to go up by 50 - 60 points and depending on the Infosys results, it may even rise up by 100 points. "The software sector was triggered off by the results announced by Hughes Software today; and similarly stocks such as Tata Power, Neyveli Lignite and AEC, will ride the wave of this announcement," he clarified.
Mr Ajay Bhatia, Senior Vice-President, Enam Securities, said "the decision to reduce the custom duty will bring down the cost of basic building blocks such as steel, plastics, petrochemicals and projects". Mr Hanu Bhatia, Vice-President, Parag Parikh Securities, said, "The announcements will be very positive for the stock market as it will enhance the feel good factor for the investors."
Mr Ved Prakash Chaturvedi, CEO, Tata TD Asset Management, hails this as an indication that the reforms process is being carried forward. The confidence that our economy can survive with lower customs duty is an indication of its strength, he says. He is confident that there will be broad-based benefits to all sectors and the fact that this move has come at a time when commodity markets are doing well will buoy the segment out of any potential downturns.
Despite the optimism, there is some amount of caution and restraint in the market. Most fund managers and stock brokers concede that this could be a pre-election tactic but are convinced that the effect of these announcements will be positive in the medium and long term. The market players seem to be advising cynics to ignore the timing and enjoy the results.
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