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Waiting for the January effect…

Jan 20, 2001

The markets have failed to show any clear direction in the first three weeks of the current year. The bourses gained in the first, lost in the second and rebounded in the third. This week the BSE and the NSE gained 157.9 points (3.9%) and 42.3 points (3.3%) respectively. Although there has been significant activity by the Foreign Institutional Investors (FIIs), who have turned net buyers, the markets have remained range bound. These market participants have started the year on an aggressive note investing $630 m or Rs 29.3 bn in the year so far. This January the FIIs have invested almost half the portfolio investments made in calendar year 2000.

It must be noted that several foreign broking houses have downgraded the tech sector at the beginning of the year. However, FII investments have been soaring and the tech counters performed well last week. Is there a link we are missing? Giving the benefit of doubt the FII investments could also be in anticipation of a favourable budget. The large investments could be an indicator of an encouraging budget as these participants are able to liaison with policy makers since they control a significant amount of investible funds.

The refining and petrochemical pivotals remained firm through the week. These sectors continued to remain hot on the back of Government disinvestment and sops to the refining sector announced in the previous week. Disinvestment in IPCL went a step further with news of the valuation being awarded to the Baroda plant to be acquired by Indian Oil Corporation (IOC). The Government also called for submission of Expression of Interest (EoI) for divesting from Indo Burmah Petroleum (IBP). The Government will be divesting 33% to bring its stake down to 26%. It is anticipated that several domestic and international players will be in the fray in order to acquire a piece of the lucrative marketing pie.

The software and cement sector picked up towards the latter half of the week. The NASDAQ recorded gains as blue chip tech companies met expectations in a season of profit warnings. The rise on the NASDAQ coupled with tech majors announcing favourable results put the sheen back on the domestic tech sector. Performance of the NASDAQ, better than anticipated result announcements and budget expectations could be the key drivers in the coming weeks.


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